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The Effect of Financial Technology on Money Demand: Evidence from Selected African States

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  • Courage Mlambo and Steven Kayambazinthu Msosa

Abstract

Purpose: The study sought to test the effect of financial technology on money demand in selected African states. The study drew from the fact that there is significant latent demand for digital payments in many markets of sub-Saharan Africa, and widespread consumer acceptance of mobile-communications technology is highly encouraging. The study sought to examine the effect of technology, among other things, on money demand. Design/Methodology/Approach: The study used panel data and a GMM panel technique to analyse the study’s findings. Findings: Results showed that all variables that captured financial technology have a negative effect with money demand (MD). Both Mobile Subscriptions (MS) and ATM (Automated Teller Machines) have a negative relationship with money demand (MD). Practical implications: Based on the results obtained in this study, the study recommended that Central Banks need to monitor and predict the consequences of financial innovations. As African states proceed with reforms of its financial sector, the stability of the demand for money would have to be reexamined and instruments of the Central Bank modified to ensure an effective control of money demand. Originality/Value: A little has been done on the effect of technological developments on money demand in Africa. An understanding of the way technological developments may positively or negatively impact on money demand may guide Central banks in adopting and implementing appropriate monetary policies and actions.

Suggested Citation

  • Courage Mlambo and Steven Kayambazinthu Msosa, 2020. "The Effect of Financial Technology on Money Demand: Evidence from Selected African States," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 366-373.
    • Handle: RePEc:ers:ijebaa:v:viii:y:2020:i:1:p:366-373
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    References listed on IDEAS

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    1. Payam MOHAMMAD ALIHA & Tamat SARMIDI & Fathin FAIZAH SAID, 2018. "Investigating The Effect Of Financial Innovations On The Demand For Money In Australia Using Dols And Fmols And Comparing Their Predictive Powers," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(1), pages 47-61, June.
    2. Marie Daumal & Selin Ozyurt, 2010. "The Impact of International Trade Flows on the Growth of Brazilian States," Working Papers DT/2010/01, DIAL (Développement, Institutions et Mondialisation).
    3. Rajesh Sharma, 2018. "Health and economic growth: Evidence from dynamic panel data of 143 years," PLOS ONE, Public Library of Science, vol. 13(10), pages 1-20, October.
    4. Aleksander Berentsen & Samuel Huber & Alessandro Marchesiani, 2018. "Limited Commitment and the Demand for Money," Economic Journal, Royal Economic Society, vol. 128(610), pages 1128-1156, May.
    5. Bassey Nsikan Edet & Solomon Ubong Udo & Okon Ubokudom Etim, 2017. "Modelling the Demand for Money Function in Nigeria: Is There Stability?," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 6(1), pages 45-57, March.
    6. Amir Mansour Tehranchian & Ahmad Jafari Samimi & Aghdas Yazdandoust, 2012. "The Impact of Modern Technology on Demand for Money in Iran," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 17(2), pages 133-148, spring.
    7. Columba, Francesco, 2009. "Narrow money and transaction technology: New disaggregated evidence," Journal of Economics and Business, Elsevier, vol. 61(4), pages 312-325, July.
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    Cited by:

    1. Jackson, Emerson Abraham, 2020. "Economics of Technology Innovation for Sustainable Growth – With reference to Sub-Saharan Africa (SSA)," MPRA Paper 101787, University Library of Munich, Germany, revised 27 May 2020.

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    More about this item

    Keywords

    Money demand; financial innovation; financial technology; money supply; monetary policy.;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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