Before revision:  Second, we account for cross-sectional heterogeneity and cluster impacts of monetary policy shocks to production industries via a sparse finite Gaussian mixture model. The results suggest substantial heterogeneities in the responses of industries to surprise monetary policy shocks. Moreover, we find that the role of network effects varies strongly over time . In particular, US recessions tend to coincide with periods where between 40 to 60 percent of the overall effects can be attributed to network effects; expansionary economic episodes show muted network effects with magnitudes of roughly 20 to 30 percent .
After revision:  Second, we allow for time-varying network structures and dependence. This feature captures both variation in the structure of the production network, but also differences in cross-industry demand elasticities. We find that impacts vary substantially over time and the cross-section. Higher-order effects appear to be particularly important in periods of economic and financial uncertainty, often coinciding with tight credit market conditions and financial stress. Differentials in industry-specific responses can be explained by how close the respective industries are to end-consumers .