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

Malihe Ashena ()
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Malihe Ashena: Assistant Professor of Economics, Faculty of Humanities, Bozorgmehr University of Qaenat

Quarterly Journal of Applied Theories of Economics, 2024, vol. 11, issue 3, 73-108

Abstract: 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. By 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 from 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 economies of developing countries, caused by financial and technological growth, lead to changes in monetary behaviors. Therefore, policymakers should adopt strategies that can help adapt to these developments and better manage money demand

Keywords: Money Demand; Financial Development; Information and Communication Technology; Developing Countries (search for similar items in EconPapers)
JEL-codes: C23 E41 L86 O16 (search for similar items in EconPapers)
Date: 2024
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