Digital Finance, Interbank Market Friction and Credit Channel Transmission of Monetary Policy

At present, China’s digital economy is booming, and the digitization of the financial system is gradually changing the internal structure of macro economy and finance, which has an impact on the first market of monetary policy transmission, the interbank market, and affects the transmission of monetary policy. Based on the case of inter-bank market friction, this paper constructs an IS-LM-CC model to deeply analyze the micro-effect mechanism of digital finance affecting credit channel transmission. The panel data of China’s provincial level from 2011 to 2020 are selected to construct a fixed effect model to empirically test the impact of digital finance on monetary policy through credit channels. Using micro data at the enterprise level, we further test whether the development of digital finance affects the dependence of enterprises on bank credit. The results show that the development of digital finance has alleviated the friction in the interbank market, significantly weakened the transmission effect of monetary policy bank credit, and reduced the dependence of enterprises on bank credit. Therefore, this paper proposes to rationally plan the statistical scope of credit scale and correctly guide the development of digital finance.