ESSAYS ON MOBILE MONEY ADOPTION AND HOMEOWNERSHIP DYNAMICS: CONSUMPTION PATTERN, MONETARY POLICY, AND RISKY ASSET CHOICE

Author

Stephen Troveh, Southern Illinois University CarbondaleFollow

Date of Award

8-1-2024

Degree Name

Doctor of Philosophy

Department

Economics

First Advisor

Gilbert, Scott

Abstract

The inexorable rise of mobile money innovation has led to huge changes in consumption and saving decisions for many households across developing economies. With this background, we use the Ghana Socio-economic Panel Survey (GSPS) data to explore the relationship between mobile money usage and household consumption and savings decisions. Firstly, we develop a framework in which mobile money shifts the budget constraint of households through the transaction cost and remittances in a dynamic setting. Secondly, we show through our empirical results that mobile money promotes household consumption, concluding that the payment convenience of mobile money improves household income by reducing transaction costs and enhancing remittance receipt, thereby promoting consumption growth. A heterogeneity analysis showed that households with larger assets, higher income, relatives overseas, residing in high-income regions, and low financial literacy experienced larger facilitating effects of mobile money on consumption than their counterparts. Meanwhile, households with fewer assets, lower income, no relatives abroad, lower financial literacy, and lower-income regions experience a greater facilitating effect of mobile money savings. Regarding consumption structure, mobile money innovation mainly promoted non-recurring household expenditures rather than recurring ones. Further analysis of consumption categories shows that medical care expenses, communication, food, and fuel expenditures are among the most affected household expenditures by mobile money use. In chapter 2; Given that monetary policy works on the interface of financial systems, fintech innovations can lead to an instability of the money demand function which affects the price level or aggregate spending and consequently, inflation. Therefore, mobile money innovation impacts not only household finance and consumption but also has monetary effects, especially on inflation and real growth. We investigated the impact of mobile money innovation on monetary policy; namely the stability of the money demand function, and output gap using panel data from 44 developing countries and the Generalized Method of Moment Technique. First, we show that there is a weak negative association between the trend of mobile money and the income velocity of money. Further analysis found a positive and statistically significant impact of the innovation on the output gap and a negatively significant effect on the money demand function. We conclude that there are countervailing effects where mobile money lowers transaction costs, improves productivity and economic efficiency, and increases output, resulting in a lesser inflationary effect. In Chapter 3; we show although numerous studies have examined the crowding-out effect of housing on portfolio choice via the house price risk channel and the liquidity constraint channel, separate analyses distinguishing risky asset choices and drawing a distinction between committed and non-committed mortgage payment under homeownership types has received less attention. We investigate the heterogeneous impact of homeownership type on risky asset choice using the 2021-2022 Survey of Economics and Household Decision-making. First, we show that homeowners with mortgage debt are less likely to participate in the cryptocurrency market compared to the stock market indicating that the higher risk associated with “speculative assets” likely induced homeowners with mortgage debt to adopt a more cautious approach to selecting their risky portfolio. The debt component separating homeowners becomes even more compelling when the risk level between assets varies significantly larger, and the agents’ incomes are lower than a certain threshold. However, changes in housing market conditions significantly change the temperance exhibited by homeowners towards risky asset selection. We further decomposed the effects across age groups, risk profiles, and income groups. In addition, we examined the crowding-out effect of house prices and liquidity constraints associated with homeownership as compared to renting. The empirical evidence shows that homeowners are less likely to participate in both the stock market and the cryptocurrency market as compared to renters due to house price risk and liquidity constraints associated with homeownership.