Xiang Li (Halle Institute for Economic Research and Martin Luther University Halle-Wittenberg  ) - Technology Adoption and the Bank Lending Channel of Monetary Policy Transmission

Co-author: Iftekhar Hasan (Fordham University)

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 is able to 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 weaker reaction to monetary policy shocks.

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