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Comparative Analysis of the Changes in Cash Demand in Hungary

Tamás Végsõ ()
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Tamás Végsõ: Magyar Nemzeti Bank

Financial and Economic Review, 2020, vol. 19, issue 1, 90-118

Abstract: The strong growth of cash in circulation in Hungary seen in recent years seemingly contradicts the changes in payment habits and can also be interpreted to show that the development of the Hungarian payment system is falling behind relative to other countries in Europe. Placing the Hungarian data in an international context, this study attempts to provide a true and accurate picture of the situation with cash usage in Hungary and uses the relevant literature to present the trends in cash demand observed globally. One important conclusion is that, in terms of their nature, transactional cash demand and cash demand for savings purposes are clearly separated, with the latter primarily responsible for the expansion of the volume of cash on a global scale. While the growth seen in Hungary may be high in European comparison, taking into consideration changes in interest rate levels and GDP it cannot be seen as extreme. Based on international trends, the realistic goal for Hungary should primarily be to decelerate the expansion, as experiences show that a nominal decrease in cash volume requires the long-term and concurrent existence of several factors.

Keywords: cash demand; cash-to-GDP ratio; payment habits; electronic payments; cash holdings; shadow economy; cashlessness (search for similar items in EconPapers)
JEL-codes: D14 E41 E42 E58 (search for similar items in EconPapers)
Date: 2020
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Handle: RePEc:mnb:finrev:v:19:y:2020:i:1:p:90-118