The Role of Electronic Payments in Inflation Dynamics

Abstract

The technological progress is transforming economy, trade and also their determinants and dynamics. Technological developments have serious effects on payment services, especially in the last 20 years. The world has been in a low inflation period compared with the previous periods. In this context, this study investigates the relationship between electronic payments and inflation dynamics in Turkey. A single equation model with the electronic payments variables is applied with quarterly data between 2005:3 -2016:3. In the equation, the total number and total volume of transactions in the electronic fund transfer system are used as proxies for the real economy and monetary policy actions. The estimation results show that both the volume and number of transactions have effects on inflation dynamics.