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Financial technologies and the effectiveness of monetary policy transmission

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  • Hasan, Iftekhar
  • Kwak, Boreum
  • Li, Xiang

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 monetary policy transmission to real GDP, consumer prices, bank loans, and housing prices. A subcategorical analysis shows that the muted transmission is the most pronounced in the adoption of FinTech payment and credit, compared to that of insurance. The regulatory arbitrage and competition between FinTech and banks are the possible mechanisms leading a mitigated monetary policy transmission.

Suggested Citation

  • Hasan, Iftekhar & Kwak, Boreum & Li, Xiang, 2021. "Financial technologies and the effectiveness of monetary policy transmission," IWH Discussion Papers 26/2020, Halle Institute for Economic Research (IWH).
  • Handle: RePEc:zbw:iwhdps:262020
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    More about this item

    Keywords

    monetary policy; financial technology; interacted panel VAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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