Monetary policy shocks impact economy differently based on sector size and linkages.
The study looked at how changes in interest rates affect different parts of the economy. They found that the speed at which prices change is the main factor influencing the impact of these changes. Sectors that are more connected to each other and have a bigger share of consumer spending also play a role. By simplifying the number of sectors, the effects of interest rate changes on the economy can be reduced. This means that the initial response of prices to interest rate changes is not enough to tell which sectors are most affected.