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Why do people save in cash? Distrust, memories of banking crises, weak institutions and dollarization

Helmut Stix ()

Journal of Banking & Finance, 2013, vol. 37, issue 11, 4087-4106

Abstract: The paper analyzes why households hold sizeable shares of their assets in cash at home rather than at banks – a phenomenon that is widespread in many economies but for which information is scarce. Using survey data from ten Central, Eastern and Southeastern European countries, I document the relevance of this behavior and show that cash preferences cannot be fully explained by whether people are banked or unbanked. The analysis reveals that a lack of trust in banks, memories of past banking crises and weak tax enforcement are important factors. Moreover, cash preferences are stronger in dollarized economies where a “safe” foreign currency serves as a store of value.

Keywords: Cash demand; Cash hoarding; Household finance; Trust in banks; Social capital; Dollarization (search for similar items in EconPapers)
JEL-codes: E41 O16 G11 D12 P34 (search for similar items in EconPapers)
Date: 2013
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Working Paper: Why Do People Save in Cash? Distrust, Memories of Banking Crises, Weak Institutions and Dollarization (2012) Downloads
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Handle: RePEc:eee:jbfina:v:37:y:2013:i:11:p:4087-4106