Investigating the effect of financial innovations on demand for money on a world scale: a systems GMM panel data approach

This article attempts to partially bridge the gap in the empirical literature by providing empirical evidence relating to the effect of ATMs on money demand on a world scale. The demand for money is a very important for the conduct of monetary policy and measurement of the effectiveness of monetary policy. A systems GMM method is used to estimate the demand for money (M2) with the inclusion of financial innovations for a panel of 215 countries and territories from 2004 to 2013. The most important advantage of this systems GMM method of Blundell and Bond (1998) is its ability to minimise small sample bias with persistence in the variables and to estimate specifications with the levels and first differences specifications of the variables simultaneously. The estimated coefficient of ATM is about 0.01 percent meaning that the sensitivity of money demand to ATM is low