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on Monetary Economics |
| By: | Arisa Chantaraboontha |
| Abstract: | This paper examines the responses of foreign exchange rates to the Federal Reserve’s large-scale asset purchases (LSAPs) and forward guidance (FWG) from 2009 to 2022 using local projections. I confirm heterogeneous responses of examined foreign exchange rates to unconventional shocks, varying by magnitude, direction, and duration depending on monetary policy conditions and the type of shock. Both shocks caused the appreciation of foreign exchange rates against the US Dollar in all monetary policy cycles, except for the FWG shock during normalization periods of monetary policy. The FWG shock had a greater impact magnitude on the examined foreign exchange rates than the LSAPs shock. The effects of both unconventional shocks were more persistent during periods of zero lower bound (ZLB) on the policy interest rate than during normalization periods of monetary policy. However, the impact of such shocks on foreign exchange rates diminished within a couple of months, contrasting with the literature that finds more persistent effects. The implementation of variance decomposition reveals that the FWG shock had a significantly greater influence on foreign exchange rate variation than the LSAPs shock, emphasizing the importance of effective guidance communication to the markets. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1276 |
| By: | Okot, Nicholas; Shinyekwa, Isaac M. B.; Bulime, Enock N. W.; Luwedde, Justine |
| Abstract: | The fourth-generation technological innovations coupled with Fintech has evolved into global transition to e-money. In Uganda the uptake and usage of e-money services have exponentially grown since the introduction of mobile money services in 2009. This study examines the theoretical foundation of e-money economics and employs time-series econometric approaches on Uganda data for the period 2009Q1-2022Q4 to assess their implication on the stability of the money demand function and transmission of monetary policy. The test for stability following the estimation of the money demand function with autoregressive distributed lag (ARDL) and transmission mechanisms in the vector autoregressive (VAR) model indicate that, e-money distorts the stability of the money demand function in the short-run and is procyclical with monetary policy shock (policy interest rates adjustments). These attributes of e-money are likely to adversely affect the effectiveness of monetary policy transmissions. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:509360b0-6f34-4037-8acd-9780301c70cb |
| By: | Ablam Estel Apeti; Bao-We-Wal Bambe |
| Abstract: | Since the 1990s, inflation targeting (IT) has been adopted by a growing number of developing countries, including in Africa, where South Africa, Ghana, and Uganda have implemented the monetary framework to promote macroeconomic stability. Despite extensive literature on the topic, little is known about the impact of IT on the performance of African economies. We fill this gap by applying the synthetic control method over the period 1990-2020 to estimate the IT effect from a counterfactual situation based on a comparison group. We find robust evidence that the IT framework has not significantly reduced inflation in any of the three countries. We then explore the underlying mechanisms and argue that weak Central bank independence and the frequent supply shocks to which African economies are exposed make it difficult for Central banks to achieve their inflation targets. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:f3726aa6-716f-45a0-8c58-fbb64bc93346 |
| By: | Ndzinisa, Patrick |
| Abstract: | The study examines how financial development affects the effectiveness of monetary policy in influencing output and inflation in South Africa, through its interaction with the repo rate. Monetary policy effectiveness in this relationship is measured by the responsiveness of output and inflation to an interaction-term between a financial development indicator and the repo rate.This is carried out by estimating an output and inflation equations incorporating the interaction-term as an explanatory variable in each of theoutput and inflation equations. If the coefficient of the interaction-terms is negative and significant it implies that the effectiveness of monetary policy in influencing output and inflation is enhanced. On the other hand, a positive and significant coefficient of the interaction-terms means that the interaction of the financial development with the repo rate dampens monetary policy effectiveness in influencing output and inflation. Considering the adoption of an Inflation Targeting Framework (ITF) monetary policy framework in 2000, the study further examines how the regime shift has affected the effectiveness of monetary policy in South Africa. The study employs an Autoregressive Distributed Lag (ARDL) model to analyse the data for long-run co integration and an Error Correction Model (ECM) to test for a short-run relationship. Additionally, the study uses a structural VAR to assess how long it takes for the interaction-terms to have full impact on output and inflation. The study concludes that the effect of monetary policy on output and inflation is enhanced through the interaction of the bank-based financial development indicator with the repo rate in South Africa. It also concludes that it takes about three quarters and four quarters for the bank-based interaction-term to have full impact on output and inflation respectively, which is quicker than it takes for the repo rate individually to have full impact on these variables. The study also finds that after the adoption of the ITF, the repo rate managed to restrain inflation to be within the targeted band at the expense of output. The study recommends that the South African Reserve Rank (SARB) should consider the bank-based financial development indicator when formulating its monetary policy. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:12656e95-0ea3-4a03-b89f-307848cd5f7f |
| By: | Okelo, Jimmy Apaa |
| Abstract: | Remittances are a major source of financing for many low-income countries. High costs, however, have held back remittance inflows. Estimates show that between 5% and 15% of remittances are lost due to the high costs. Mobile Money has emerged as a powerful tool for cross-border money transfers. Since it was launched in Uganda in 2012, cross-border transfers through mobile money increased tremendously. Inward remittances rose to US$ 45.5 million in December 2021, up from just US$ 6.5 million in 2013. Among the available Mobile Money products (deposits, withdrawals, person-to-person (p2p), person-to-business (p2b), airtime and data purchase), inward and outward remittances grew fastest in 2016-2022 with annual growth rates of 96.4% and 158.3%. The increased use of Mobile Money is a reprieve to lower costs. Data from the World Bank shows that mobile money operators charge the lowest costs. In addition to enhancing competition, convenience, and security, mobile money also serves as a price discovery platform, enabling customers to initiate transactions directly from their handsets without the need to visit operators' outlets. This allows users to transact when exchange rates are favorable. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:a7ec19e9-03e8-466f-bf91-8674bd0d2e02 |
| By: | Okot, Nicholas; Shinyekwa, Isaac; Luwedde, Justine; Bulime, Enock W. N. |
| Abstract: | The policy brief summarizes findings from a study titled, The Monetary Economics of E-money and Policy Implications: Evidence from Uganda. The study examines the monetary economics of e-money and its policy implications for over the period 2009Q1-2022Q4. The research approach involves theoretical and empirical literature reviews. Quantitatively estimated and tested the stability of the money demand function using the Autoregressive Distributed Lag (ARDL) model and the monetary transmission through Vector Autoregressive (VAR) model. The qualitative aspect is based on the key informant interviews. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:40da5726-dd33-436e-9a85-d279d3713099 |
| By: | Ndayikeza, Michel Armel; Nyamweru, Jean Claude; Ndoricimpa, Arcade |
| Abstract: | This study examines the use of mobile money services in Burundi and compares it with other East African countries to identify areas for improvement. The focus is on the supply side, with the aim of offering practical recommendations for policy makers to enhance the usage of mobile money. We use secondary data to compare mobile money usage and transaction fees across East African Community (EAC) countries. Additionally, the analysis draws on semi-structured interviews with key informants from the National Agency of Regulation and Control of Telecommunications, the Central Bank of Burundi, the Ministry of Finance, and other institutions crucial to the development of mobile money. The information collected during these interviews is organized into four thematic areas: institutional environment and regulation, interoperability, government's role, and the impact on smallholder farmers. The findings indicate that mobile money usage in Burundi is relatively low, standing at 11%, in comparison to other EAC countries. Although higher than South Sudan's usage rate of 1%, it falls far behind Tanzania (45%), Uganda (54%), and Kenya (69%). The cost of sending US$ 10 varies between 0.2% and 10.8% across EAC countries, with the lowest fees observed in Kenya and the highest in Tanzania. Interviews with experts highlighted the need for supply-side actors to recognize the country's low mobile money usage rate and fully realize the potential benefits of this technology. The study contributes to the limited literature on mobile money and digital finance in Burundi and offers some policy recommendations to address the issue. |
| Date: | 2024–08–15 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:ff95cc46-5259-4cf8-8fbc-798a94d01ede |
| By: | Sekumbo, Karia; Ringo, Noela; Manda, Constatine |
| Abstract: | The mobile money industry has conferred numerous benefits to consumers from all segments of income distribution. Given the rapid ascent of the industry, policymakers have grappled with its effective taxation. A key reason underlying this is a poor understanding of the distributional effects. This policy brief investigates a controversial tax that was instituted on mobile money withdrawals in Tanzania in 2021. Almost immediately after its introduction, transaction volumes across mobile money platforms plummeted. Tanzanian policymakers revised the tax multiple times before eventually removing it altogether. Given this U-turn, we investigate how the tax affects different consumer groups. Our findings revealed that salaried workers in urban areas as being more likely to reduce consumption of mobile money services. These results suggest that less wealthy respondents in rural areas with fewer substitutes were forced to contend with this tax while wealthier urban respondents substituted into different financial services. To relieve the rural poor of the onerous burden of this tax, we suggest revising the burden on wealthier segments to ensure that the incidence of taxation leaves them indifferent to contending with the tax as opposed to substituting into different financial services. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:f320982d-cd74-4343-b276-864a33b25103 |
| By: | Ndoricimpa, Arcade; Nyamweru, Jean Claude; Ndayikeza, Michel Armel |
| Abstract: | This study examines the factors determining mobile money adoption and use in Burundi. Heckman selection model is applied on a recent household dataset (Integrated household living conditions survey in Burundi, EICV 2019-2020). The estimation results point to different socio-economic factors that drive the adoption and use of mobile money in Burundi. Age category, education level, being a member of savings and loans associations, and household size are the factors determining the likelihood of mobile money adoption in Burundi, while the probability of mobile money use in Burundi seems to be influenced only by education level, place of residence, and the well-being level. Considering this studys findings, the Government of Burundi should implement policies to reduce the gender gap and duality urban-rural. Efforts should also be put on education investment to reduce illiteracy. The Government of Burundi should also continue implementing policies to raise the well-being of the population and social self-sustained groups, and initiatives to increase incomes of the population especially in rural areas should be encouraged. In addition, concerted effort from different stakeholders, mobile network operators and regulators, is also needed. Making payment systems flexible by increasing mobile agents in remote areas would also most likely lead to increased mobile money adoption. We hope that the findings from this study will inform public authorities to take necessary measures to increase mobile money adoption and use in Burundi. |
| Date: | 2024–08–15 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:680a7bb0-16b9-426a-a24f-19e40903c5ce |
| By: | Osoro, Jared; Bundi, Davis; Kiplangat, Josea |
| Abstract: | The noticeable strides Kenya has made on digital financial services that anchor the positive narrative of financial inclusion is evidently leaning towards payment services. However, digital divide still exists due to behavioural heterogeneity. This paper explores the influence of behavioural biases in access and usage of mobile money services, the dominant digital financial services in Kenya. The 2021 FinAccess data anchors the empirical investigation on the extent to which behavioural biases are an obstacle to access and usage of mobile money. Deploying descriptive statistics on gender disaggregated data and a probit model to estimate marginal effects, we ascertain that behavioural biases contribute to the digital divide evident among men and women households in Kenya. These biases drive a wedge between access and enhanced usage of digital financial services in a manner that slows the sequential process of the former, leading to the latter. Beyond advancing literature in this area, this paper proffers arguments in favour of putting in place measures to enhance household incomes that have a gender lens, for they have the potential of ameliorating the gaps underlying financial exclusion of women and low-income earners in mobile money access and usage. It also argues for a policy position that discourages the consideration of basic digital financial services as a revenue mobilization platform through direct taxation as that could be counterintuitive. |
| Date: | 2024–08–15 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:0cdc9b6d-5d8c-46e6-8f00-e9039cb8238b |
| By: | Ndayikeza, Michel Armel; Ndoricimpa, Arcade; Nyamweru, Jean Claude |
| Abstract: | Contrary to the general perception of the authorities interviewed for this study, the latest national survey on mobile money shows that its usage is very low in the country compared to most EAC countries (See Table). Over the period 2019 to 2020, only 11.4% of Burundians reported using their phone to pay, send or receive money. However, the demographics of users, notably gender composition, rural or urban area of residence, age, and education, are similar to those of other EAC countries. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:27c0d032-3fb1-4653-bf70-4ea7725f65aa |
| By: | Garang, James Alic |
| Abstract: | This paper examines the constraints both to the evolution of mobile money and the broader banking sector provision of financial services in South Sudan, focusing on the conflict and state of financial inclusion during the 2011-2021 period. While mobile money has gained momentum in the region and beyond, its introduction in the South Sudanese market is recent, and adoption has been much slower, and differentiated, with customers more likely to have a mobile money account if they are better educated, live in the city, are male, and wealthy. A key contributor is the rudimentary level of South Sudans financial sector development, which feeds into financial exclusion, and the impact of preceding conflicts. Broadly, the paper confirms the longstanding view that economic disruption associated with the civil war and lack of supportive infrastructure are central barriers to expansion of financial services across the country. In conclusion, sustained stability and improved general infrastructure could enhance expansion of financial services and broader inclusion in South Sudan. |
| Date: | 2025–02–07 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:cb78f530-2e9e-4afd-be28-513187bcc244 |
| By: | Munyegera, Ggombe Kasim |
| Abstract: | Digital financial services (DFS) have the potential to promote payments efficiency and boost financial inclusion even in remote areas with minimal traditional financial infrastructure such as bank branches. In Rwanda, the digitization of payments is a key policy strategy in a bid to transform the country towards a more cashless and knowledge-based economy. Since the establishment of the Rwanda Integrated Payments Processing System (RIPPS), various policy and product innovations have been put in place to increase the share of transactions done electronically. This study examines the development path of digital financial services in Rwanda over the decade 2011-2021 using a mixed-methods approach. The quantitative part entails descriptive and regression analysis to ascertain the trend, patterns and determinants of uptake for key DFS products in the country while the qualitative key informant interviews with key stakeholders are used to ascertain the opportunities and challenges for further promoting DFS in the country. The findings indicate that between 2011 and 2021, the number of people using Internet and mobile banking increased quite substantially. The number of active mobile money subscribers increased from 1.6 million in 2012 to 5.1 million in 2021, while credit cards increased from 115, 200 in 2011 to 686, 309 in 2021. The transactional volume and value also increased remarkably, partly fueled by COVID-19 and innovative use of mobile money, including electronic tax payment. The study recommends improving Internet connectivity and quality, promoting digital literacy, improving interoperability and enhancing cyber security to further boost DFS in Rwanda. |
| Date: | 2024–08–15 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:319299ff-f4f7-4716-a582-12b056c2bb85 |
| By: | Ilias Aarab; Thomas Gottron |
| Abstract: | The rapidly increasing availability of large amounts of granular financial data, paired with the advances of big data related technologies induces the need of suitable analytics that can represent and extract meaningful information from such data. In this paper we propose a multi-layer network approach to distill the Euro Area (EA) banking system in different distinct layers. Each layer of the network represents a specific type of financial relationship between banks, based on various sources of EA granular data collections. The resulting multi-layer network allows one to describe, analyze and compare the topology and structure of EA banks from different perspectives, eventually yielding a more complete picture of the financial market. This granular information representation has the potential to enable researchers and practitioners to better apprehend financial system dynamics as well as to support financial policies to manage and monitor financial risk from a more holistic point of view. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.15611 |
| By: | Botha, Rosemary; Kamninga, Tony; Tuyisenge, Methode |
| Abstract: | It is widely known that financial inclusion is key in achieving development at macro and micro level. Rwanda has over the years made great strides in financial inclusion with 93% of the adult population being financially included. Mobile money is the biggest driver of financial inclusion in Rwanda with the uptake among women being relatively lower (84%) compared to men (90%). The fifth Sustainable Development Goal identifies the achievement of gender equality and women empowerment as one important pillar in the achievement of sustainable development. With the high coverage of digital financial inclusion through mobile money and its current structure in the country, it is unknown whether agency is improved for women with access to mobile money. Digital technology has gained prominence to support women empowerment by changing the way business is done and creating better employment opportunities. The current operation of mobile money provides a reliable platform for transactions, but more reforms could be done to provide even better benefits to its clients. This brief discusses results investigating the effect of mobile money access on women empowerment in Rwanda. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:df2934bb-b4e4-43cb-b555-a476fe2aab43 |
| By: | Michael Heinrich Baumann; Anja Janischewski |
| Abstract: | Financial bubbles and crashes have repeatedly caused economic turmoil notably but not only during the 2008 financial crisis. However, both in the popular press as well as scientific publications, the meaning of bubble is sometimes unspecified. Due to the multitude of bubble definitions, we conduct a systematic review with the following questions: What definitions of asset price bubbles exist in the literature? Which definitions are used in which disciplines and how frequently? We develop a system of definition categories and categorize a total of 122 papers from eleven research areas. Our results show that although one definition is indeed prevalent in the literature, the overall definition landscape is not uniform. Next to the mostly used definition as deviation from a present value of expected future cash flows, we identify several other definitions, which rely on price properties or other specifications of a fundamental value. This research contributes by shedding light on the possible variations in which bubbles are defined and operationalized. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.10101 |
| By: | Georgarakos, Dimitris (European Central Bank); Kim, Kwang Hwan (Yonsei University); Coibion, Olivier (University of Texas at Austin); Shim, Myungkyu (Yonsei University); Lee, Myunghwan Andrew (New York University); Gorodnichenko, Yuriy (University of California, Berkeley); Kenny, Geoff (European Central Bank); Han, Seowoo (Yonsei University); Weber, Michael (World Bank) |
| Abstract: | Using surveys of households across thirteen countries, we study how much individuals would be willing to pay to eliminate business cycles. These direct estimates are much higher than traditional measures following Lucas (2003): on average, households would be prepared to sacrifice around 5-6% of their lifetime consumption to eliminate business cycle fluctuations. A similar result holds for inflation: to bring inflation to their desired rate, individuals would be willing to sacrifice around 5% of their consumption. Willingness to pay to eliminate business cycles and inflation is generally higher for those whose consumption is more pro-cyclical, those who are more uncertain about the economic outlook, and those who live in countries with greater historical volatility. |
| Keywords: | cost of business cycles, willingness to pay, inflation |
| JEL: | E3 E4 E5 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17675 |
| By: | Ndoricimpa, Arcade; Nyamweru, Jean Claude; Ndayikeza, Michel Armel |
| Abstract: | Despite the importance of financial inclusion for economic growth and poverty reduction, the formal banking system rarely reaches the rural areas, and when it does, the cost of their services becomes a barrier for low income households and small businesses. The proportion of adult population that owned an account at a financial institution in Burundi was 12.5% in 2016. This is very low com-pared to the sub-Saharan African average of 34%. In addition, a national financial inclusion survey in Burundi in 2016 indicated that the ratio of account holders was five times higher in urban areas than in rural areas. Moreover, the survey indicated some gender and demographic differences in account ownership. The proportion of men owning an account was found to be almost double the women, while the proportion of young people (aged 18-29 years) owning an account was half of those aged 30 years and older. The ratio of account holders was found to vary depending on socioeconomic category; it was found to be 89.5% among state employees, 52.1% for private sector employees, 30.1% for traders and 5.3% for farmers. Contrary to what is observed in many other developing countries, women were found to constitute only 28.3% of microfinance institutions customers. It should be noted that the lack of access to formal financial services means that the poor and small businesses are limited in their ability to save, repay debts, and manage risk responsibly. Its therefore imperative to find innovative models that help extend financial services to the financially excluded and the poor. Its for this reason that digital financial services started in developing countries through mobile phones, in a bid to try bridging the financial inclusion gap. Mobile money technology has been introduced in Burundi as well, but the adoption and use are still low compared to other countries in the region. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:b5046945-9f4a-46df-95b9-db88047c497d |
| By: | World Bank |
| Keywords: | Agriculture-Agribusiness Agriculture-Food Security Macroeconomics and Economic Growth-Inflation Macroeconomics and Economic Growth-Econometrics |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wboper:42625 |