This Is What's in Your Wallet...and Here's How You Use It

Tamás Briglevics and Scott Schuh
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Tamás Briglevics: Magyar Nemzeti Bank
Scott Schuh: West Virginia University

No 20-04, Working Papers from Department of Economics, West Virginia University

Abstract: Consumer wallets have more means of payment yet cash still is used most. We develop a dynamic structural model blending cash inventory management and payment instrument choice. For each expenditure, consumers endogenously pay with cash, debit card, or credit card with an option to withdraw cash beforehand. The model is estimated with transaction-level data from a daily consumer payment diary and reveals that utility from payment services exceed cash management costs. For payment card owners, optimal cash holdings are about $50 and jointly determined with the share of cash payments. Eliminating either cash or payment cards reduces consumer welfare significantly.

Keywords: Money demand; cash inventory management; payment demand; debit cards; credit cards; structural estimation; discrete-continuous choice; Diary of Consumer; Payment Choice (search for similar items in EconPapers)
JEL-codes: D12 D14 E41 E42 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2020-04
New Economics Papers: this item is included in nep-mac, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:wvu:wpaper:20-04

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