The Relations between telephony money transactions and inflation determination

Evidence from Kenya using An ARDL Approach

Abstract

The purpose of the paper was to examine the relationship between telephony money transactions and inflation in Kenya in the period 2007 to 2017 firstly, due to the fears allayed that the advent of mobile money transactions could be increasing inflation, and secondly, to determine the existence of causality between telephony money transactions and inflation. The ARDL Bounds test of co-integration is employed and the findings reveal that there is insignificant relationship between telephony money transactions and Inflation in the long run and the null hypotheses are accepted, however, the error correction terms are negative and significant showing bidirectional causality between inflation and the telephony money transactions constructs implying that there is need for continuous implementation of interdependent policy actions for effective monetary and inflation targeting.

Keywords: Telephony Money Transactions, Inflation, ARDL, Kenya