Retail payments and the real economy

Yanying Zhang, Gaiyan Zhang, Liuling Liu, Tania De Renzis and Heiko Schmiedel

Journal of Financial Stability, 2019, vol. 44, issue C

Abstract: This study investigates how retail payment methods affect aggregate macroeconomic activity. By tracing the relative norms and practices of paper-based payment instruments (checks) and electronic payment methods (payment cards, credit transfers and direct debits) in 27 European Union member countries, the paper reports that a higher penetration ratio of electronic payment methods is generally associated with greater GDP, trade, consumption and tax revenue. The 2008 financial crisis and a country’s shadow economy level have an incremental impact on the relationship between payment methods and economy. The study also finds substitution effects between paper-based and electronic payment methods and complementary effects across electronic payment methods. The findings are robust after controlling for endogeneity. Our study supports policies promoting further repositioning and transfer to efficient electronic payment instruments.

Keywords: Retail payments; Real economy; Financial development; Shadow economy; Financial crisis (search for similar items in EconPapers)
JEL-codes: G20 G21 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:44:y:2019:i:c:s1572308918301475

DOI: 10.1016/j.jfs.2019.100690

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