Impact of Fintech & Monetary Policy on Liquidity Creation

Abstract

The study aims to identify the impact of monetary policy and financial technology on bank liquidity creation for commercial banks in Pakistan. The annual time series data was gathered from 2004-2003. The multiple regression technique was used to test the hypotheses. The findings suggest that FinTech and monetary policy significantly positively affect bank liquidity creation in Pakistan. It means that banks' adoption and implementation of FinTech enhance their ability to create economic liquidity. The State Bank of Pakistan must effectively use the monetary policy rate to control the liquidity the banks create in the economy, as the excess amount of liquidity creation harms the economy. However, the State Bank of Pakistan should effectively use the monetary policy rate to manage the liquidity creation. Future researchers should consider other factors, such as adopting artificial intelligence and sustainable development on liquidity creation in Pakistan or other countries. Sustainable liquidity creation must be introduced so that the economy's liquidity creation is environmentally friendly. Liquidity is created when banks finance illiquid assets by utilizing liquid liabilities; the banks must finance only those illiquid loans that are environmentally friendly.