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Mobile Money and Money Demand in Kenya

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  • Elizabeth Kasekende

    (Bank of Uganda)

  • Eftychia Nikolaidou

    (School of Economics, University of Cape Town)

Abstract

Over the years, several countries have experienced a variety of financial innovations that can have implications for monetary policy. Kenya has been at the forefront of a unique type of financial innovation, mobile money (M-PESA), introduced in 2007. This paper re-estimates the Kenyan money demand including the country specific innovation, mobile money, using the ARDL approach to cointegration over the period 2000 Q1 to 2014 Q2. The results suggest that there is a positive relationship between mobile money and money demand and that the Kenyan demand for money is stable when mobile money is taken into consideration. These results are robust even with the use of alternative measures of mobile money. This finding has important implications for the effectiveness of monetary policy in Kenya and possibly in other countries that have seen developments in mobile money in recent years.

Suggested Citation

  • Elizabeth Kasekende & Eftychia Nikolaidou, 2018. "Mobile Money and Money Demand in Kenya," School of Economics Macroeconomic Discussion Paper Series 2018-11, School of Economics, University of Cape Town.
    • Handle: RePEc:ctn:dpaper:2018-11
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