Digital payments and the deposits channel of monetary policy transmission: evidence from the Euro area

Crabtree, Daniel; Osio, Julber; Van de Vel, Mathieu

Digital payments and the deposits channel of monetary policy transmission: evidence from the Euro area

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Crabtree, D, Osio, J, Van de Vel, M. Digital payments and the deposits channel of monetary policy transmission: evidence from the Euro area. 2025. handle: https://hdl.handle.net/10230/72702

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Abstract

This paper investigates whether digital-payment adoption amplifies or dampens, via the deposits channel, the transmission of monetary policy in the Euro Area. Using a novel digitalisation proxy based on ECB payment statistics, we estimate standard and interacted panel VAR models to capture the dynamic effects of policy shocks across varying levels of digitalisation. While all specifications indicate stronger deposit rate pass-through in more digitalised economies, only the interacted model (IPVAR) shows these effects evolve over time. Findings suggest digitalisation alters early transmission mechanisms. Real macroeconomic effects remain limited. Results underscore the need to consider digital infrastructure in policy analysis.