Tuesday, June 28, 2022
We study how lenders' responses to monetary policy are affected by changes in market concentration due to the rise of new fintech lenders. We exploit several variations on the U.S. automobile market across lenders and regions with different exposure to new fintech lending. Results support that different lenders have different sensitivity to changes in short-term and long-term rates. Sensitivity of auto rates to changes in short-term rate is decreasing in market concentration, while sensitivity to changes in long-term rate is increasing. These results are robust to different market concentration measures, and to unexpected rate changes. These variations also impact the effect of monetary transmission on local economic activities.