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Brown Bag Seminar
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Technology Adoption and the Bank Lending Channel of Monetary Policy Transmission
Iftekhar Hasan, Xiang Li
IWH Discussion Papers,
This paper studies whether and how banks‘ technology adoption affects the bank lending channel of monetary policy transmission. We construct a new measurement of bank-level technology adoption, which can tell whether the technology is related to the bank‘s lending business and which specific technology is adopted. We find that lending-related technology adoption significantly strengthens the transmission of the bank lending channel, meanwhile, adopting technologies that are not related to lending activities significantly mitigates that. By technology categories, the adoption of cloud computing technology displays the largest impact on strengthening the bank lending channel. Moreover, higher exposure to BigTech competition is significantly associated with a weaker reaction to monetary policy shocks.
Financial Technologies and the Effectiveness of Monetary Policy Transmission
Iftekhar Hasan, Boreum Kwak, Xiang Li
IWH Discussion Papers,
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, with the weakened transmission to bank loan growth being the most pronounced. The relaxed financial constraint, regulatory arbitrage, and intensified competition are the possible mechanisms underlying the mitigated transmission.
Inside Asset Purchase Programs: The Effects of Unconventional Policy on Banking Competition
Michael Koetter, Natalia Podlich, Michael Wedow
ECB Working Paper Series,
We test if unconventional monetary policy instruments influence the competitive conduct of banks. Between q2:2010 and q1:2012, the ECB absorbed Euro 218 billion worth of government securities from five EMU countries under the Securities Markets Programme (SMP). Using detailed security holdings data at the bank level, we show that banks exposed to this unexpected (loose) policy shock mildly gained local loan and deposit market shares. Shifts in market shares are driven by banks that increased SMP security holdings during the lifetime of the program and that hold the largest relative SMP portfolio shares. Holding other securities from periphery countries that were not part of the SMP amplifies the positive market share responses. Monopolistic rents approximated by Lerner indices are lower for SMP banks, suggesting a role of the SMP to re-distribute market power differentially, but not necessarily banking profits.
The Dynamics of Bank Spreads and Financial Structure
Reint E. Gropp, Christoffer Kok, J.-D. Lichtenberger
Quarterly Journal of Finance,
This paper investigates the effect of within banking sector competition and competition from financial markets on the dynamics of the transmission from monetary policy rates to retail bank interest rates in the euro area. We use a new dataset that permits analysis for disaggregated bank products. Using a difference-in-difference approach, we test whether development of financial markets and financial innovation speed up the pass through. We find that more developed markets for equity and corporate bonds result in a faster pass-through for those retail bank products directly competing with these markets. More developed markets for securitized assets and for interest rate derivatives also speed up the transmission. Further, we find relatively strong effects of competition within the banking sector across two different measures of competition. Overall, the evidence supports the idea that developed financial markets and competitive banking systems increase the effectiveness of monetary policy.