The effect of financial innovations on money supply in Uganda (2009Q1 -2018Q4)

Abstract

The study set out to examine the effect of financial innovations on Money Supply in Uganda from 2009Q1 to 2018Q4. Unit root and Bounds test of cointegration were performed prior to the ARDL model regression estimation. The unit root test result shows a mixture of both stationary and non-stationary variable. In addition, there was evidence of cointegration using Bounds test. The estimated error correction ARDL model indicates a negative effect of the number of Automated Teller Machines on money supply in the long run, whereas Mobile money did not have an impact on money supply. The study recommends that, the central bank of Uganda should take up the regulation of all financial products in the country so as to harmonize the charges and easily regulate the use of financial innovation products in the financial sector since they greatly facilitate and ease money transactions in the economy which when not regulated make the forces of demand and supply unstable leading to price instabilities hence complicating monetary policy formulation.