Financial technologies and the effectiveness of monetary policy transmission

Iftekhar Hasan, Boreum Kwak and Xiang Li

European Economic Review, 2024, vol. 161, issue C

Abstract: This study investigates whether and how financial technologies (FinTech) influence the effectiveness of monetary policy transmission. We use an interacted panel vector autoregression model to explore how the effects of monetary policy shocks change with regional-level FinTech adoption. Results indicate that FinTech adoption generally mitigates the transmission of monetary policy to real GDP, consumer prices, bank loans, and housing prices, with the most significant impact observed in the weakened transmission to bank loan growth. The relaxed financial constraints, regulatory arbitrage, and intensified competition are the possible mechanisms underlying the mitigated transmission.

Keywords: Monetary policy; Financial technology; Interacted panel VAR (search for similar items in EconPapers)
JEL-codes: C32 E52 G21 G23 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Financial technologies and the effectiveness of monetary policy transmission (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:161:y:2024:i:c:s0014292123002787

DOI: 10.1016/j.euroecorev.2023.104650

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