Financial Technology and the Transmission of Monetary Policy: The Role of Social Networks

No 2203, Working Papers from Federal Reserve Bank of Dallas

Abstract: Financial technology-based (FinTech) lending is expected to ease U.S. mortgage market frictions that have weakened the transmission of monetary policy to households. This paper establishes that social networks play a key role in consumers’ adoption of FinTech lending, which amplifies the effects of a monetary stimulus. I provide causal estimates of the network effect on FinTech adoption using county-level data. To quantify the role of FinTech lending and network spillovers in the transmission of monetary policy shocks, I build a heterogeneous-agent model with social learning. The model shows that the consumption response to a monetary stimulus is 13% higher in the presence of FinTech lending and network spillovers, and that about half of this improvement is accounted for by network spillovers.

Keywords: FinTech; network effects; monetary policy; mortgage; consumption; refinancing (search for similar items in EconPapers)
JEL-codes: E21 E44 E52 G21 G23 (search for similar items in EconPapers)
Pages: 66
Date: 2022-03-25, Revised 2023-02-14
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-fdg, nep-mac, nep-mon, nep-net, nep-pay and nep-ure
Note: Previously circulated under the title, "FinTech Lending, Social Networks and the Transmission of Monetary Policy."
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:93889

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DOI: 10.24149/wp2203r1

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