Financial technologies and the effectiveness of monetary policy transmission

Iftekhar Hasan, Boreum Kwak, Xiang Li

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 concerning 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.

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Year of publication:	[2023] ; This version: August 25, 2023
Authors:	Hasan, Iftekhar ; Kwak, Boreum ; Li, Xiang
Publisher:	Halle (Saale), Germany : Halle Institute for Economic Research (IWH) - Member of the Leibniz Association
Subject:	monetary policy \| financial technology \| interacted panel VAR \| Geldpolitik \| Monetary policy \| Geldpolitische Transmission \| Monetary transmission \| VAR-Modell \| VAR model \| Finanztechnologie \| Financial technology \| Theorie \| Theory \| Finanzdienstleistung \| Financial services