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Payment Technologies And Money Demand: Evidence From Dynamic Panel

Author

Listed:
  • Payam Mohammad ALIHA

    (Ph.D candidate, National University of Malaysia (UKM), Malaysia)

  • Tamat SARMIDI

    (Professor Dr. Faculty of Economics and Management, National University of Malaysia (UKM), Malaysia)

  • Abu Hassan SHAARI

    (Professor Dr. Faculty of Economics and Management, National University of Malaysia (UKM), Malaysia)

  • Fathin Faizah SAID

    (Professor Dr. Faculty of Economics and Management, National University of Malaysia (UKM), Malaysia)

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.

Suggested Citation

  • Payam Mohammad ALIHA & Tamat SARMIDI & Abu Hassan SHAARI & Fathin Faizah SAID, 2017. "Payment Technologies And Money Demand: Evidence From Dynamic Panel," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(1), pages 41-52, June.
    • Handle: RePEc:hrs:journl:v:ix:y:2017:i:1:p:41-52
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    Citations

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    Cited by:

    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(2), pages 17-30, July.
    2. Payam MOHAMMAD ALIHA & Tamat SARMIDI & Fathin FAIZAH SAID, 2018. "Investigating The Impact Of Financial Innovation On The Volatility Of The Demand For Money In The United Stated In The Context Of An Arch/Garch Model," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(1), pages 19-26, June.
    3. Bita Shabgard, 2021. "Single euro payment area (SEPA) and banking industry: discriminatory pricing vs. non-discriminatory pricing," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 48(3), pages 355-383, September.
    4. Toleu PANIYAZ & Kargash ZHANPEIISSOVA & Oralbay KABUL & Aigul AMANTAYEVA, 2021. "Strategic Priorities Of The National Policy Of The Republic Of Kazakhstan On The Development Of Regions," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 83-92, June.

    More about this item

    Keywords

    Money demand; ATM; Financial innovation; Dynamic panel data model; GMM;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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