Emerging Developments in the Demand for Money: The Role of ICT Expansion and Financial Development

From a paper by Malihe Ashena:

“Considering the vital role of money demand in monetary and economic policies and its importance in economic stability, it is necessary to know the factors affecting it. Focusing on the increasing role of new technologies and financial developments, this paper examines the effect of financial development and the expansion of information and communication technology (ICT) on the demand for money in developing countries. This study uses principal component analysis (PCA) to calculate the ICT index. The research model is estimated using annual data obtained from the World Bank and International Monetary Fund during 2002-2021 for a selected group of developing countries. The long-run relationship between the variables has been investigated in a Panel-ARDL model. The research results show that ICT and financial development both have a negative and significant impact on money demand. These results point to the development of ICT infrastructure and financial resources to control money demand. In other words, increasing access to financial instruments and widespread use of ICT technologies has reduced the need to hold cash. These results indicate that structural changes in the economy of developing countries, caused by financial and technological growth, lead to changes in monetary behaviors. Therefore, policymakers should adopt strategies that can help adapting these developments and better manage money demand.”

Posted by at 6:41 AM

Labels: Inclusive Growth

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