The Effect of Digital Finance on Money Demand in Kenya

Abstract

This study was motivated by the increased number of mobile money transactions which has direct implications on money multiplier, financial depth, velocity of money and the conduct of monetary policy in Kenya. The study sought to investigate the effect of digital finance on the demand for money in Kenya. The study utilized time-series data covering the period 2007Q2 to 2018Q4. Estimation results reveals that digital finance negatively influences money demand. Therefore,financial developments have changed the monetary policy landscape in Kenya, with adecrease in the overall proportion of the unbanked population with a combined and sustained gradual decline in the currency circulating outside the banks