Effect Of Mobile Money Transactions On Inflation In Kenya

Abstract

S ensitivity of the economy is a great concern for the government, policy makers, firms, individuals, financial markets, exporters and even importers. Therefore the primary aim of this research was to establish the link of inflation, mobile money transactions and amount of total value of mobile deposits. The study adopted an analytical research design to enable the researcher to analyze the impact of mobile transactions and value of monthly deposits on inflation individually. The study collected data from March 2007 to May 2016 when that mobile money was first introduce to enable the researcher to clearly establish any effect the mobile transactions have had in long term since their inception. The data collected was first assessed for suitability for the study and once ascertained graphs were drawn to show the graphical relationship between the variables. The data was further checked for linear relationship and the relationship was proved insignificant due to violation of CLM assumptions by the residuals in the model. Hence the researcher undertook autoregressive distributed lagged regression to assess the effect of total mobile transactions and total value of mobile transactions on inflation. Findings from the study indicated that both monthly mobile transactions and total value of monthly deposits have a lagged effect on inflation of up to one month. The study established that inflation has a lagged effect on itself up to four months and the lagged effect is highly significant. The study observed that the lagged effect of inflation on itself was more significant and influenced inflation in future more that the effect of mobile transaction had on inflation in future. The study therefore recommended that government policy should be aimed at targeting inflation triggers in the economy so as to better manage inflation and adopt the use of lagged effect of inflation on itself to estimate future inflation and cub inflation in Kenya. The study recommended that government take into consideration the effect of mobile transactions on inflation and on other macro variables in the economy.