Payment systems, inside money and financial intermediation

Ouarda Merrouche () and Erlend Nier

Journal of Financial Intermediation, 2012, vol. 21, issue 3, 359-382

Abstract: This paper assesses the impact of introducing an efficient payment system on the amount of credit provided by the banking system. Using payment system reforms in Eastern European countries over the 1995–2005 period as a natural experiment, we find evidence that payments reforms were an important precondition for the credit boom observed in our sample countries. We also find that payment system reforms led to a shift away from cash (outside money) and towards demand deposits (inside money) as a medium of exchange and that this in turn enabled an expansion of credit in the sample countries. These findings have important implications for our understanding of financial intermediation, highlighting the nexus between banks’ role as providers of payment services and as providers of credit.

Keywords: Payment systems; Money demand; Credit supply (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Payment Systems, Inside Money and Financial Intermediation (2012)
Working Paper: Payment systems, inside money and financial intermediation (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:21:y:2012:i:3:p:359-382

DOI: 10.1016/j.jfi.2012.01.002

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