In reality, the nation is made up of diverse regions that are linked but that respond differently to changing economic circumstances. The idea that monetary policy can have varied effects across regions is a short and logical next step. Monetary policymakers have access to a lot of information about regional economic conditions. Additional information on differences in the impact of monetary policy across regions may aid policymakers in their consideration of regional developments in the formulation of national monetary policy. Regional Differences in the Mix of Interest-Sensitive Industries.
Different industries respond quite differently to changes in interest rates.
These different responses may interact with the different mix of industries across regions, and this interaction may result in differential regional effects of monetary policy. For example, changes in interest rates are likely to have profound effects on people's ability to buy houses and on businesses' willingness to acquire new structures. Compounding these differences are interregional trade relationships, which can transmit localized responses differently across regions. Regional Differences in the Ability of Banks to Alter Their Balance Sheets. Fed policy actions can have varied effects on different banks' ability to make loans.