The European Central Bank has published an Occasional Paper summarising research from the European System of Central Banks’ ChaMP network on how structural change is affecting monetary policy transmission in the euro area. The paper, which carries a disclaimer that the views are those of the authors rather than the ECB, concludes that transmission remains effective but is not constant. It varies with the sectoral composition of the economy, global integration, financial conditions and inflation regimes. More service-intensive economies tend to show weaker real responses to rate increases, while high-inflation environments are associated with faster and stronger price pass-through, helping explain why the recent disinflation episode came with relatively low output costs. The paper also highlights that supply shocks, energy shocks and firms’ positions in production networks can materially change the inflation-output trade-off and make policy calibration more dependent on the source and persistence of shocks. Financial frictions and leverage amplify transmission for bank-dependent and constrained firms, while monetary policy can also affect the supply side through innovation, reallocation and productivity, with tighter policy tending to weigh on research and development, technology adoption and some forms of efficient capital allocation. Climate and energy transition effects are similarly uneven across sectors and households, with energy-intensive activities and lower-income households more exposed. Across these channels, the paper argues that policy analysis should rely less on fixed lags and linear relationships and instead incorporate state-contingent transmission, recurring supply disturbances and forward-looking transition dynamics. It adds that some of these findings are already being used in the ECB’s 2025 strategy review.
European Central Bank2026-07-06
European Central Bank publishes research on state dependent monetary policy transmission under structural change
The European Central Bank has published an Occasional Paper summarising ChaMP research that finds euro area monetary policy transmission is effective but state-dependent and shaped by structural change. The paper says service-sector expansion can mute real effects, while high inflation, leverage, supply shocks and production networks can strengthen or alter pass-through. It also finds monetary policy can influence innovation, productivity and green-transition dynamics, supporting a more state-contingent policy framework.