Factors Shaping Euro and Forint Cash Holding Ratios - The Rise of Cash Demand for Savings Purposes from the Turn of the Millennium

Aniko Bodi-Schubert () and Ildiko Ritzlne Kazimir ()
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Aniko Bodi-Schubert: Magyar Nemzeti Bank
Ildiko Ritzlne Kazimir: Magyar Nemzeti Bank

Financial and Economic Review, 2023, vol. 22, issue 3, 67-96

Abstract: This study reviews the factors shaping forint and euro cash demand for savings purposes by examining the cash holding ratio. Forint and euro cash holding ratios are both rising, which points to an increase in cash savings. According to the results, in the long run, the cash demand for savings purposes is determined by traditional variables such as wealth and yields, along with uncertainty, the price of financial services and the institutional environment. In the short run, the change in uncertainty and the evolution of short interest rates dominate. Crises and the sudden shifts in the institutional environment lead to a shock, with large growth in the cash holding ratio for both currencies.

Keywords: cash demand; error correction model; uncertainty; cash holding ratio (search for similar items in EconPapers)
JEL-codes: E12 E41 E58 E71 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:mnb:finrev:v:22:y:2023:i:3:p:67-96

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