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E-Money and Monetary Policy Transmission
Author:
Zixuan Huang
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Amina Lahreche
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https://orcid.org/0000-0003-4019-4578
,
Mika Saito https://isni.org/isni/0000000404811396 International Monetary Fund

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Ursula Wiriadinata https://isni.org/isni/0000000404811396 International Monetary Fund

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Series:
IMF Working Papers
Volume/Issue:
Volume 2024: Issue 069
Language:
English
Publication Date:
29 Mar 2024
DOI:
https://doi.org/10.5089/9798400270543.001
ISBN:
9798400270543
ISSN:
1018-5941
Pages:
46
Keywords:
Monetary policy transmission; banks; nonbank financial institutions; e-money; panel data; e-money development; e-money issuer; e-money intensity; E-Money intensity; Financial inclusion; Central bank policy rate; Deposit rates; Bank credit; Sub-Saharan Africa; Africa
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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E-money development has important yet theoretically ambiguous consequences for monetary policy transmission, because nonbank deposit-taking e-money issuers (EMIs) (e.g., mobile network operators) can either complement or substitute banks. Case studies of e-money regulations point to complementarity of EMIs with banks, implying that the development of e-money could deepen financial intermediation and strengthen monetary policy transmission. The issue is further explored with panel data, on both monthly (covering 21 countries) and annual (covering 47 countries) frequencies, over 2001 to 2019. We use a two-way fixed effect estimator to estimate the causal effects of e-money development on monetary policy transmission. We find that e-money development has accompanied stronger monetary policy transmission (measured by the responsiveness of interest rates to the policy rate), growth in bank deposits and credit, and efficiency gains in financial intermediation (measured by the lending-to-deposit rate spread). Evidence is more pronounced in countries where e-money development takes off in a context of limited financial inclusion. This paper highlights the potential benefits of e-money development in strengthening monetary policy transmission, especially in countries with limited financial inclusion.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund