Will digital financial development affect the effectiveness of monetary policy in emerging market countries?

Whether digital finance should be included in the quantitative framework of monetary policy in emerging market countries has been widely discussed by scholars. However, the current research just focused on a single format of digital finance, lacking comprehensive analysis at the overall level and th...

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Autores principales:	Song Jiang, Shuang Qiu, Hong Zhou
Formato:	article
Lenguaje:	EN
Publicado:	Taylor & Francis Group 2021
Materias:	digital financial development spatial effect effectiveness of monetary policy dynamic spatial panel model covid-19 Economic growth, development, planning HD72-88 Regional economics. Space in economics HT388
Acceso en línea:	https://doaj.org/article/9ad1f9db712b407da32eece6de895f48
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spelling	oai:doaj.org-article:9ad1f9db712b407da32eece6de895f482021-11-11T14:23:41ZWill digital financial development affect the effectiveness of monetary policy in emerging market countries?1331-677X1848-966410.1080/1331677X.2021.1997619https://doaj.org/article/9ad1f9db712b407da32eece6de895f482021-10-01T00:00:00Zhttp://dx.doi.org/10.1080/1331677X.2021.1997619https://doaj.org/toc/1331-677Xhttps://doaj.org/toc/1848-9664Whether digital finance should be included in the quantitative framework of monetary policy in emerging market countries has been widely discussed by scholars. However, the current research just focused on a single format of digital finance, lacking comprehensive analysis at the overall level and the refinement of general rules. Therefore, this paper constructed a spatial econometric model to empirically analyze the impact of digital finance on the effectiveness of monetary policy and its heterogeneity, taking China as the representative of emerging market countries. The empirical test showed that (1) Although the total index of digital finance had a negative impact on economic growth, the interaction between digital finance and monetary policy was significantly positive. This indicated that the “moderating effect” of monetary policy was beneficial to digital finance in promoting economic growth, which was confirmed from the subindexes level as well. (2) The development of digital finance had obvious characteristics of the “polarization effect” and the “spatial spillover effect”. Meanwhile, there was a significant regional difference in the “moderating effect” of monetary policy. (3) In terms of control variables, consumption level, fixed capital formation level, and fiscal policy all had a significant positive impact on economic growth, with a positive “spatial spillover effect”. Whereas, the impacts of COVID-19 and export level on economic growth were both negative. Hence, coping with the challenges of COVID-19 and revitalizing exports were important breakthroughs for emerging market countries to recover the domestic economy. Finally, based on the empirical conclusions, this paper proposed three suggestions. First, monetary policy should be strengthened to intervene in the development of digital finance. Second, digital financial development should be integrated into the quantitative framework of monetary policy. Third, it is essential to build a “double pillar” policy framework to compensate for the shortage of monetary policy.Song JiangShuang QiuHong ZhouTaylor & Francis Grouparticledigital financial developmentspatial effecteffectiveness of monetary policydynamic spatial panel modelcovid-19Economic growth, development, planningHD72-88Regional economics. Space in economicsHT388ENEkonomska Istraživanja, Vol 0, Iss 0, Pp 1-36 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	digital financial development spatial effect effectiveness of monetary policy dynamic spatial panel model covid-19 Economic growth, development, planning HD72-88 Regional economics. Space in economics HT388
spellingShingle	digital financial development spatial effect effectiveness of monetary policy dynamic spatial panel model covid-19 Economic growth, development, planning HD72-88 Regional economics. Space in economics HT388 Song Jiang Shuang Qiu Hong Zhou Will digital financial development affect the effectiveness of monetary policy in emerging market countries?
description	Whether digital finance should be included in the quantitative framework of monetary policy in emerging market countries has been widely discussed by scholars. However, the current research just focused on a single format of digital finance, lacking comprehensive analysis at the overall level and the refinement of general rules. Therefore, this paper constructed a spatial econometric model to empirically analyze the impact of digital finance on the effectiveness of monetary policy and its heterogeneity, taking China as the representative of emerging market countries. The empirical test showed that (1) Although the total index of digital finance had a negative impact on economic growth, the interaction between digital finance and monetary policy was significantly positive. This indicated that the “moderating effect” of monetary policy was beneficial to digital finance in promoting economic growth, which was confirmed from the subindexes level as well. (2) The development of digital finance had obvious characteristics of the “polarization effect” and the “spatial spillover effect”. Meanwhile, there was a significant regional difference in the “moderating effect” of monetary policy. (3) In terms of control variables, consumption level, fixed capital formation level, and fiscal policy all had a significant positive impact on economic growth, with a positive “spatial spillover effect”. Whereas, the impacts of COVID-19 and export level on economic growth were both negative. Hence, coping with the challenges of COVID-19 and revitalizing exports were important breakthroughs for emerging market countries to recover the domestic economy. Finally, based on the empirical conclusions, this paper proposed three suggestions. First, monetary policy should be strengthened to intervene in the development of digital finance. Second, digital financial development should be integrated into the quantitative framework of monetary policy. Third, it is essential to build a “double pillar” policy framework to compensate for the shortage of monetary policy.
format	article
author	Song Jiang Shuang Qiu Hong Zhou
author_facet	Song Jiang Shuang Qiu Hong Zhou
author_sort	Song Jiang
title	Will digital financial development affect the effectiveness of monetary policy in emerging market countries?
title_short	Will digital financial development affect the effectiveness of monetary policy in emerging market countries?
title_full	Will digital financial development affect the effectiveness of monetary policy in emerging market countries?
title_fullStr	Will digital financial development affect the effectiveness of monetary policy in emerging market countries?
title_full_unstemmed	Will digital financial development affect the effectiveness of monetary policy in emerging market countries?
title_sort	will digital financial development affect the effectiveness of monetary policy in emerging market countries?
publisher	Taylor & Francis Group
publishDate	2021
url	https://doaj.org/article/9ad1f9db712b407da32eece6de895f48
work_keys_str_mv	AT songjiang willdigitalfinancialdevelopmentaffecttheeffectivenessofmonetarypolicyinemergingmarketcountries AT shuangqiu willdigitalfinancialdevelopmentaffecttheeffectivenessofmonetarypolicyinemergingmarketcountries AT hongzhou willdigitalfinancialdevelopmentaffecttheeffectivenessofmonetarypolicyinemergingmarketcountries
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Will digital financial development affect the effectiveness of monetary policy in emerging market countries?

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