The Impact of Volume of Electronic Transactions on Demand for Currency, Coins and Narrow Money Supply

With the entering of information technology into the field of payments systems, the traditional payments systems have been replaced by the electronic payments systems, and cause formation of certain changes in the composition of monetary variables, which can in turn affect on concerned monetary policies.
In this paper, an attempt is made to examine the impacts of increase in the volume of Automated Teller Machines (ATM) transactions and Point Of Sale (POS) transactions on demand for currency and coins and narrow money supply, vis-à-vis using quarterly time series data from 2004 to 2013 and applying various econometrics methods. The results prima facie indicate that increase in (ATM) transactions may lead to augmentation of demand for currency and coins and mitigation of volume of narrow money per se. Similarly, rising the volume of (POS) transactions, have reduced significantly the demand for currency and coins and have boosted the volume of narrow money supply. Thus, with respect to relative escalation of volume of (POS) transactions compared to volume of (ATM) transactions, we can conclude that moving towards electronic payments systems may lead to upsurging the volume of narrow money supply and diminishing the demand for currency and coins, quid pro qua.