​Digital Payments and Cash Demand in the Philippines

Tristan Canare and Ivory Myka Galang
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Tristan Canare: Bangko Sentral ng Pilipinas
Ivory Myka Galang: Bangko Sentral ng Pilipinas

No 202601, BSP Discussion Paper Series from Bangko Sentral ng Pilipinas

Abstract: This study analyzed the relationship between digital payments and demand for cash using data from the Philippines from late 2019 to 2024. Cash demand was measured using two indicators — bank cash withdrawals from the central bank and currency in circulation to GDP ratio. We also used two measures of digital payments. First is a narrow indicator that measures person-to-person (P2P) and person-to merchant (P2M) transactions made through the Philippines’ QR code system. Second is a wider and more encompassing measure that includes, aside from P2P and P2M, more sophisticated and higher-value financial transactions. Using the Auto-Regressive Distributed Lag method, with Instrumental Variable regressions to address possible heterogeneity, we found evidence that (i) overall, digital payments have a negative long-run relationship with total cash demand, (ii) the relationship is stronger with the wider measure of digital payments, (iii) the relationship is driven by large denominations, and (iv) the relationship varies between the two measures of cash demand.

JEL-codes: C22 E41 E42 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2026-01
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Published as BSP Discussion paper No. 2026-01, March 2026

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Persistent link: https://EconPapers.repec.org/RePEc:bhd:dpaper:202601

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