The main objectives of this paper are to assess the impact of the monetary policy on 53 manufacturing industries via the interest rate and the exchange rate channels and to analyze the causes of diversified effects of monetary policy on each industry by employing the Vector Autoregressive and Panel Regression Analysis. The paper uses monthly time-series data from June 2000 to February 2008 which is the period after the Bank of Thailand (BoT) adopted the inflation targeting framework in conducting its monetary policy. The empirical results express that each manufacturing industry is influenced by the monetary policy differently and significantly, both in terms of magnitudes and duration. The magnitudes and degrees of foreign capital dependence are responsible for varied effects of monetary policy on each manufacturing industry. The small industries are severely affected and long lasting relative to the large industries; additionally, the monetary policy affects and influences Non-FDI industries significantly relative to their counterparts, FDI industries. Moreover, the study shows that the interest rate channel plays more important roles than the exchange rate channel. Regarding policy implications, the BoT should cautiously conduct its monetary policy and should take the heterogeneous effects of monetary policy on each industry into account in implementing monetary policy, in particularly in the case of tightening policy. To increase the key policy rate, the BoT should take risks of output contraction in some vulnerable industries such as Manufacture of machinery and equipment, Motor vehicles, Paper and paper products and Textiles. These industries possess high contributions to total employment and the Gross Domestic Product (GDP).
