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Monetary policy and the recent slowdown in manufacturing and services

Author

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  • Battistini, Niccolò
  • Gareis, Johannes

Abstract

Manufacturing activity has been weak since the end of 2021, while market services activity has started to slow down more recently. This box uses a lead-lag analysis to examine how developments in manufacturing are correlated with services activity. It then assesses the implications of the recent monetary policy tightening for the near-term outlook across sectors through the lens of an empirical model. The lead-lag analysis shows that current dynamics in manufacturing contain information for near-term dynamics in services activity. The model-based assessment shows that monetary policy shocks have a larger and faster impact on manufacturing than on services and are consistent with a broadening of the impact of monetary policy tightening across sectors during 2023. JEL Classification: C11, E32, E52

Suggested Citation

  • Battistini, Niccolò & Gareis, Johannes, 2024. "Monetary policy and the recent slowdown in manufacturing and services," Economic Bulletin Boxes, European Central Bank, vol. 8.
    • Handle: RePEc:ecb:ecbbox:2024:0008:4
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    More about this item

    Keywords

    Bayesian structural vector autoregression model; Manufacturing; Monetary policy; Services;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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