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ABSTRACT
This study investigates the role of cashless policy in the demand for money in Nigeria using Vector Error Correction Model (VECM) technique. While both the long -run and short-run results converge, the trends and patterns of cashless policy instruments in Nigeria show that the Automated Teller Machine (ATM) remains attractive to Nigerian people while the use of internet banking transactions oscillates, perhaps, due to poor internet infrastructure and the problem of cyber insecurity. However, the findings suggested that the cashless policies of ATM and POS impact negatively on the demand for money in Nigeria. Also, the weighted average interest rate and the exchange rate aligns with t he theoretical proposition of negative relationship with money demand while inflation, government expenditure, real GDP and web transfer impact positively on money demand in Nigeria in the long run. These findings also mirror the short-run situation. Consequently, it is recommended that an aggressive internet infrastructure, enactment of stringent cyber -crime laws and regulations and existing ones are being implemented while low lending rate should be promoted by the Central Bank of Nigeria.
Keywords: Money, Demand, Vector Error Correction Model
Introduction:
Away from the conventional use of money as a store of value, standard of deferred payment, medium of exchange and as a unit of account, there has been a drift towards electronic money, which is quite challenging to define because it is blended with technological and economic characteristics (Basel Committee, 1998; BIS, 1996). According to European Central Bank (1998), Electronic money is broadly defined as an electronic store of monetary value on a technical device that may be widely used for making payments for the undertakings other than the issuer without necessarily involving bank accounts in the transactions, but acting as a prepaid bearer instrument. Analogous to this definition, is the cashless economy where no notes and coins issued by central banks exist, but by private financial institutions(De Grauwe et. al., 2001; Claudia and De Grauwe, 2001). Several scholars have attempted to analyze the cashless system or e-banking. However, it becomes clear that few of these studies present a comprehensive evaluation of cash -less policy implications in developing countries. Most studies ignore the economic benefits of the equation while some examine its negative implications incompletely....