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An impulse response function analysis of the impact of modern payment technologies on money demand in Nigeria

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  • Tersoo IORNGURUM

    (Veritas University Abuja, Nigeria)

  • Godwin NWAOBI

    (Veritas University Abuja, Nigeria)

Abstract

In order to assess the efficacy of modern payment technologies in facilitating access to liquidity services in Nigeria, this study employs impulse response function (IRF) analysis and variance decomposition (VD) analysis to study the relationship between modern payment technology patronage and money demanded primarily for liquidity services (currency) in the Nigerian economy during the period 2009Q1 to 2019Q1. Firstly, via impulse response function (IRF) analysis, the study finds that the money demanded primarily for liquidity services responds positively to shocks in modern payment technology transactions during the period under investigation. Secondly, via variance decomposition (VD) analysis, the study finds that a substantial proportion of the variation in money demanded primarily for liquidity services is attributable to modern payment technology transactions as well as other conventional money demand determinants in the short-term horizon (4 quarters) and the long-term horizon (20 quarters). In conclusion, based on the fact that money demanded primarily for liquidity services responds positively and nonnegligibly to modern payment technology transactions, we recommend that modern payment technology patronage should be promoted by Nigeria’s monetary authority in order to extend liquidity services to more Nigerians.

Suggested Citation

  • Tersoo IORNGURUM & Godwin NWAOBI, 2021. "An impulse response function analysis of the impact of modern payment technologies on money demand in Nigeria," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(627), S), pages 97-112, Summer.
    • Handle: RePEc:agr:journl:v:2(627):y:2021:i:2(627):p:97-112
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    References listed on IDEAS

    as
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    3. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    4. Laura Rinaldi, "undated". "Payment Cards and Money Demand in Belgium," International Economics Working Papers Series ces0116, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, International Economics.
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