Payment technologies and money demand

Evidence from dynamic panel

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

The banking system has experienced rapid and significant technological changes in recent years, including automated teller machines (ATMs), automated clearing houses, point of sale systems, telephone transfers, automatic bill payer accounts, and credit cards. The total effect of these innovations on money demand has been the subject of some empirical research; however, the individual effect of most of these innovations has not been estimated. This article attempts to partially bridge the gap in the empirical literature by providing empirical evidence relating to the effect of ATMs on money demand in world scale. The demand for money is a very important for the conduct of monetary policy and measurement of the effectiveness of monetary policy. This study attempts to analyse if financial innovations has impacted the demand for money using a system (the original equation and the transformed one) GMM method. In this study, money demand dynamics are examined empirically by using the Blundell-Bond estimator which reinforces Arellano-Bond by making an additional assumption that first differences of instrument variables are uncorrelated with the fixed effects. It makes it possible to introduce more instruments that improve the efficiency considerably. We estimate the demand for money (M2) for a panel of 215 countries and territories from 2004 to 2013. The elasticity of the demand for real money to ATM is about 0.01 percent meaning that the sensitivity of money demand to ATM is low. In other words, money demand is not elastic with regard to ATM.

Original languageEnglish
Pages (from-to)41-52
Number of pages12
JournalRegional Science Inquiry
Volume9
Issue number1
Publication statusPublished - 1 Jun 2017

Fingerprint

money
demand
evidence
monetary policy
innovation
telephone system
Money demand
Dynamic panel
Payment
technological change
banking
sale
bill
elasticity
empirical research
credit
Demand for money
efficiency
effect
Innovation

Keywords

  • ATM
  • Dynamic panel data model
  • Financial innovation
  • GMM
  • Money demand

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development
  • Sociology and Political Science
  • Economics and Econometrics

Cite this

Payment technologies and money demand : Evidence from dynamic panel. / Aliha, Payam Mohammad; Sarmidi, Tamat; Md Nor, Abu Hassan Shaari; Said, Fathin Faizah.

In: Regional Science Inquiry, Vol. 9, No. 1, 01.06.2017, p. 41-52.

Research output: Contribution to journalArticle

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