Monetary policy, FinTech, and financial stability

James Atambilla Abugre, Joshua Yindenaba Abor, Joseph G. Nellis and Emmanuel Joel Aikins Abakah

Chapter 22 in The Elgar Companion to Financial Economics, 2025, pp 405-429 from Edward Elgar Publishing

Abstract: This chapter investigates the effects of monetary policy and financial technology (FinTech) on financial stability in emerging and developing countries. The study uses a panel data set of 80 emerging and developing countries over the period 2000–2021. We employ the Dynamic System Generalised Moments Method in the analysis. The empirical findings indicate that financial stability is positively affected by monetary policy. In addition, FinTech also enhances financial stability. Furthermore, the interaction between monetary policy and FinTech plays a positive moderating role in promoting the efficiency and robustness of the financial system, hence improving financial stability in emerging and developing countries. The paper further finds a positive moderating role that tight monetary policy and FinTech independently play in enhancing financial stability during financial distress and crisis periods. However, their interaction in times of banking crises adversely affects the financial system and further deepens the precarious liquidity and systemic conditions of financial institutions. The chapter contributes to extant literature on the relationship between monetary policy, FinTech, and financial stability nexus and further adds new contributions on how these two affect the stability of the financial system in times of crisis in an economy.

Keywords: Monetary policy; Financial technology; Financial stability; Banking crisis; Developing economies (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035341399
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