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Digital Payments and Monetary Policy Transmission

Author

Listed:
  • Liang, Pauline

    (Stanford U)

  • Sampaio, Matheus

    (Northwestern U)

  • Sarkisyan, Sergey

    (Ohio State U)

Abstract

We examine the impact of digital payments on the transmission of monetary policy by leveraging administrative data on Brazil's Pix, a digital payment system. We find that Pix adoption diminished banks' market power, making them more responsive to changes in policy rates. We estimate a dynamic banking model in which digital payments amplify deposit demand elasticity. Our counterfactual results reveal that digital payments intensify the monetary transmission by reducing banks' market power-banks respond more to policy rate changes, and loans decrease more after monetary policy hikes. We find that digital payments impact monetary transmission primarily through the deposit channel.

Suggested Citation

  • Liang, Pauline & Sampaio, Matheus & Sarkisyan, Sergey, 2024. "Digital Payments and Monetary Policy Transmission," Working Paper Series 2024-14, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2024-14
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    File URL: https://ssrn.com/abstract=4933059
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    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • 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

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