Credit Card Usage and Inflation: A Case Study of a Small Open Economy

Abstract

This study examined the influence of credit card usage on inflation in a small open economy, Malaysia. The existing studies used money supply, and bank lending as the key monetary determinants of inflation in Malaysia. These two variables had also been re-examined separately for comparison purpose. Other macroeconomic variables were economic activity and imports. The paper employs The Autoregressive Distributed Lag (ARDL) approach using time series data with monthly observations over 1997-2017. The results of this study showed that the price level, the imports and economic activity were cointegrated. In the long-run, credit card usage was more elastic than bank lending. The economic activity remained the most elastic determinant of price level. In the short-run, bank credit growth, and money supply growth determine the inflation. Meanwhile, imports growth and economic growth did not influence the inflation. The past inflation rates were found to be informative to the current inflation. Hence, this study suggested that inflation in Malaysia was due to 'too much financing'. This study also provided policy implications.

Pengurusan Hutang Kad Kredit – Sorotan Literatur Bersistematik daripada 2010-2020 (Credit Card Debt Management – Systematic Literature Review from 2010-2020)

“…Kajian-kajian terdahulu banyak menumpukan perbincangan berkenaan kesan hutang kad kredit terhadap pengguna dalam konteks kesihatan umum (Clayton et al 2015), kesihatan mental (Dackehag et al 2019) dan kelangsungan kewangan peribadi (Daud et al 2019;Hauff, Carlander, Gärling, & Nicolini, 2020). Begitu juga faktor-faktor kepada pengurusan hutang ( Azma et al, 2019;Agarwal, Pan, & Qian, 2020;Rahman et al 2020), serta kesan keterhutangan kad kredit yang berlebihan terhadap makro ekonomi negara dari sudut kenaikan harga barangan, pengganguran dan NPL (Non Performing Loan) (Theong, Osman, & Yap, 2018;Soh, 2019;Jia Rou Wong & Cheong Tang, 2020). Terdapat juga beberapa kajian sorotan literatur bersistematik yang telah dilakukan dalam konteks hutang seperti Turunen & Hiilamo, (2014); Amit et al, (2020), namun masih kurang kajian dalam konteks pengkhususan terhadap pengurusan hutang dalam kalangan pengguna kad kredit konvensional dan Islamik.…”

The Impact of a Cashless Payment System on Inflation

“…Titalessy (2020) also explains that credit card transactions have no significant effect on inflation. Furthermore, Z. J. R. Wong & Tang (2020) research explains that credit cards positively affect inflation.…”