How can central banks take account of differences across households and firms for monetary policy?

Papers in this volume were prepared for a meeting of emerging market Deputy Governors organised by the Bank for International Settlements on 17–18 March 2025.

Different economic agents might respond differently to the same policy action. Information about household and firm heterogeneity can, therefore, enhance central banks' understanding of monetary policy transmission and ultimately its effectiveness. Cross-sectional data can also help central banks understand economic conditions and the distributional effects of monetary policy.

The papers in this volume examine the extent to which cross-sectional differences matter for monetary policy in emerging market economies, why they matter, and how central banks can adjust their monetary policy approaches in response. The papers also identify challenges to incorporating cross-sectional information in monetary policy analysis, such as data limitations, technical complexities, and communications.