This paper examines how booms and busts in peer-to-peer (P2P) lending in the People’s Republic of China (PRC) affect monetary policy transmission to inflation and output.

Using state-dependent local projection methods, the results of the paper indicate a weaker transmission during boom phases. Stricter regulation on P2P lending since 2017 in the PRC and the substantial scaling back of P2P lending could positively impact the monetary management of the economy.