The macroeconomic impacts of the mobile money: empirical evidence from EVC plus in Somalia

Abstract

PurposeThe purpose of this study was to examine the macroeconomic impact of mobile money in Somalia using quarterly data from 2010 to 2020.Design/methodology/approachThis study applied the structural vector autoregressive approach to examine the response of the macroeconomic variables to the mobile money shocks.FindingsThe results show that mobile money increases consumer spending by reducing transaction costs and enhancing access to finance, which promotes the expansion of aggregate output. This study also finds that mobile money helps exchange rate stability and price level maintenance, boosting trade openness. Moreover, mobile money is linked to the rise in real income due to productivity improvement and price stability. The results of this study indicated that mobile money has a short-run relationship with aggregate output, household consumption, price level, trade openness and real income. Through the Granger causality test, this study finds that mobile money has a unidirectional relationship with the exchange rate, price level, household consumption and trade openness.Originality/valueThe empirical findings of this study imply that mobile money can create a wide range of financial services to improve the financial system in rural and urban areas; hence, it enables poor and rural members of society to make payments and receive-and-transfer money using their mobiles.