A Review of "Financial Technology and the Transmission of Monetary Policy: The Role of Social Networks"
by Xiaoqing Zhou Journal of Political Economy
How Social Networks Are Shaping FinTech Adoption in the U.S. Mortgage Market
In a recent study published in the Journal of Political Economy, Xiaoqing Zhou dives into the fascinating role social networks play in driving the adoption of financial technology (FinTech) within the U.S. mortgage market—and what that means for monetary policy.
By analyzing county-level data, Zhou uncovers that social network spillovers significantly boost FinTech adoption, making homeowners more likely to refinance their mortgages. But the implications don’t stop there. These findings feed into a structural model that quantifies how these shifts affect monetary policy, particularly the refinancing channel.
The results are striking: in the FinTech era, consumers are more responsive to interest rate cuts. Even more interesting? About half of this heightened responsiveness is linked directly to the influence of social networks. In other words, it’s not just technology changing the game—it’s the way people share and spread information that’s amplifying the impact of monetary policy.
Yes... Social media is a game changer for the markets.