Examining How Integrating Non-Cash Payment And BNPL/ Consumer Loans Affected Short-Term Inflation In Kazakhstan(And Its Long-Term Effect)

Abstract

The research is devoted to assessing whether the rapid digitalization of retail payments and the expansion of BNPL consumer lending have led to significant changes in the inflation rates in Kazakhstan. Specifically, it examines the extent to which the integration of non-cash payments and consumer loans has affected the short-term inflation, and whether it has modified the long-term relationship between the price dynamics and fundamental macroeconomic factors. The study has utilized a newly formed monthly dataset for 2016–2025, combining standard macroeconomic indicators (CPI, base rate, exchange rate, Brent crude oil price, M2 money supply, inflation expectations) with detailed payment behavior indicators (non-cash transaction volume, cash withdrawals, number of POS terminals, consumer/BNPL loans). The Phillips–Perron tests demonstrate that most variables are integrated to the order I(1) in the levels and static in the first differences, which motivates the application of VAR models in the changes, as well as the utilization of Johansen's cointegration approach and error correction models (ECMs) in the levels. The empirical strategy has been implemented in three stages. First, we estimated the basic and extended VAR models on monthly basis, analyzing impulse responses and forecast quality (MSE/MAE, Mincer-Zarnowitz regressions, Diebold-Mariano tests). Second, the models were re-estimated on pre- and post-COVID subsamples to understand whether the sharp rise in non-cash payments after 2020 coincided with the change in the transmission mode of inflation shocks. Third, we estimated ECM models that allowed us to separate the long-term united movement of variables from short-term dynamics and compare the results with the VAR estimates. The Holtz orderliness, lag length, and impulse response horizon have been used as checks. The results demonstrate that the main short-term drivers of inflation remain the standard macroeconomic shocks—primarily, money supply growth, inflation expectations, and, to a lesser extent, the base rate. Adding indicators of non-cash payments, POS terminals, and consumer loans had actually no effect on impulse responses to macroeconomic shocks; while the shocks to payment variables themselves induced only small, short-term, and statistically weak effects on Δ(y/y) of the CPI and did not lead to a significant improvement in the forecast accuracy. ECM estimates show that digitalization indicators have correlated with the long-term price levels, while having almost no effect on monthly inflation after accounting for macroeconomic controls. Overall, the findings indicate that the rapid digitalization of payments and the expansion of the BNPL segment in Kazakhstan have not become a significant independent source of short-term inflation, but rather a part of broader structural and technological process of economic adaptation.