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Monetary policy and local industry structure

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  • Popov, Alexander
  • Steininger, Lea

Abstract

We study how monetary policy affects local market competition in a union of countries ex-periencing different economic conditions: the euro area. We find that when monetary conditions tighten (loosen), from the point of view of an individual economy, market concentration increases (declines). This effect is more pronounced when interest rates have been low-for-long, and it is stronger in sectors that are relatively more sensitive to changes in financing conditions. The underlying mechanism is a decline (increase) in short-term debt and investment by smaller and medium-size firms, relative to large firms, following monetary policy tightening (easing). JEL Classification: E2, G1, G12

Suggested Citation

  • Popov, Alexander & Steininger, Lea, 2023. "Monetary policy and local industry structure," Working Paper Series 2778, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20232778
    Note: 861282
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    More about this item

    Keywords

    Competition; Eurozone; Low Interest Rates; Monetary Policy; Monetary Union;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • G1 - Financial Economics - - General Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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