The demand for cash: stylized facts and substitution by electronic means of payment

Luis Cabezas and Alejandro Jara

Revista CEPAL, 2021

Abstract: This article analyses the impact of the increasing use of electronic means of payment on the demand for cash (banknotes and coins). It estimates two models: one with panel data and the other with cross-sectional data. The two methodologies offer complementary views for evaluating the degree to which electronic means of payment act as a determinant of currency in circulation. The study identifies an intense substitution process between cash and electronic means of payment, which is common to most of the economies analysed. However, there are also a number of idiosyncratic factors that explain the high degree of heterogeneity in the demand for cash that exists between countries. In emerging economies, electronic payment is still incipient, so the demand for cash is likely to continue to decline. However, this does not mean that these economies will become “cashless societies” in the near future.

Date: 2021-12
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Persistent link: https://EconPapers.repec.org/RePEc:ecr:col070:47820

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