Abstract This paper examines the differential real effects of monetary policy across industries. The purpose is to test whether these differential effects can be accounted for by an incomplete-information, rational-expectations model of the business cycle, in the Lucas-Barro tradition. Such a model implies a positive relation across markets between the variability of market-specific shocks and the reduced-form output effect of a monetary shock. This proposition is tested using industry-level post-war U.S. data, and support is found. The exploration also uncovers other interesting industry-level and aggregate results.