Debit card and cash usage: a cross-country analysis

Gene Amromin and Sujit Chakravorti

No WP-07-04, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: During the last decade, debit card transactions grew rapidly in most advanced countries. While check usage declined and has almost disappeared in some countries, the stock of currency in circulation has not declined as fast. We use panel estimation techniques to analyze the change in transactional demand for cash resulting from greater usage of debit cards in 13 countries from 1988 to 2003. We are able to disentangle cash?s store of value function from its payment function by separating cash into three denomination categories. We find that the demand for low denomination notes and coins decreases as debit card usage increases because merchants need to make less change for customer purchases. On the other hand, the demand for high denomination notes is generally less affected suggesting that these denomination notes are also used for non-transactional purposes.

Keywords: Debit cards; Cash flow; Payment systems (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-mon
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Citations: View citations in EconPapers (22)

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