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Effects of credit and debit cards on the currency demand

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  • Hakan Yilmazkuday
  • M. Ege Yazgan

Abstract

We analyze the effects of credit and debit cards on the currency in circulation by using GMM estimation. Instead of using the data obtained by surveys, we use monthly data obtained by an interbank institution that keeps the statistics of all credit and debit cards usage of a small open economy, Turkey, for the period over 2002M1-2006M10. As expected from the theory, we find that an increase in the usage of credit and debit cards leads to a decrease in the currency demand. Moreover, the usage of the debit cards has a bigger effect on the money demand, compared to the usage of the credit cards. We also find that the effect of credit cards is mostly through purchases and the effect of debit cards is mostly through withdrawals

Suggested Citation

  • Hakan Yilmazkuday & M. Ege Yazgan, 2009. "Effects of credit and debit cards on the currency demand," Applied Economics, Taylor & Francis Journals, vol. 41(17), pages 2115-2123.
    • Handle: RePEc:taf:applec:v:41:y:2009:i:17:p:2115-2123
    DOI: 10.1080/00036840701222496
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    References listed on IDEAS

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    1. Arvind Agrawal & James W. Gentry, 2020. "Why do many consumers prefer to pay now when they could pay later?," Journal of Consumer Affairs, Wiley Blackwell, vol. 54(2), pages 607-627, June.
    2. Yilmazkuday, Hakan, 2011. "Monetary policy and credit cards: Evidence from a small open economy," Economic Modelling, Elsevier, vol. 28(1), pages 201-210.
    3. David, Bounie & Abel, François & Patrick, Waelbroeck, 2016. "Debit card and demand for cash," Journal of Banking & Finance, Elsevier, vol. 73(C), pages 55-66.
    4. Jun Nagayasu, 2012. "Financial innovation and regional money," Applied Economics, Taylor & Francis Journals, vol. 44(35), pages 4617-4629, December.
    5. repec:idn:journl:v:22:y:2019:i:2a:p:1-26 is not listed on IDEAS
    6. Laura Rinaldi, "undated". "Payment Cards and Money Demand in Belgium," International Economics Working Papers Series ces0116, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, International Economics.
    7. Paul Marmora & Brenden J. Mason, 2021. "Does the shadow economy mitigate the effect of cashless payment technology on currency demand? dynamic panel evidence," Applied Economics, Taylor & Francis Journals, vol. 53(6), pages 703-718, February.
    8. Ala' Bashayreh & Mohammad W. Alomari & Samer Abdelhadi & Naderh Mryan, 2019. "Banks' financial innovation and the demand on money," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 12(3), pages 169-179.
    9. Andrea Mercatanti & Fan Li, 2017. "Do debit cards decrease cash demand?: causal inference and sensitivity analysis using principal stratification," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 66(4), pages 759-776, August.
    10. Anirudh Tagat & Pushpa L. Trivedi, 2020. "Demand for cash: an econometric model of currency demand in India," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 13(2), pages 205-222, May.
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    1. Arvind Agrawal & James W. Gentry, 2020. "Why do many consumers prefer to pay now when they could pay later?," Journal of Consumer Affairs, Wiley Blackwell, vol. 54(2), pages 607-627, June.
    2. Hakan Yilmazkuday, 2007. "Inflation targeting supported by managed exchange rate," Applied Economics, Taylor & Francis Journals, vol. 39(16), pages 2011-2026.
    3. Jun Nagayasu, 2012. "Financial innovation and regional money," Applied Economics, Taylor & Francis Journals, vol. 44(35), pages 4617-4629, December.
    4. Yilmazkuday, Hakan, 2011. "Monetary policy and credit cards: Evidence from a small open economy," Economic Modelling, Elsevier, vol. 28(1-2), pages 201-210, January.
    5. Yazgan M. Ege & Yilmazkuday Hakan, 2005. "Inflation Dynamics of Turkey: A Structural Estimation," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 9(1), pages 1-15, March.
    6. Andrea Mercatanti & Fan Li, 2017. "Do debit cards decrease cash demand?: causal inference and sensitivity analysis using principal stratification," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 66(4), pages 759-776, August.
    7. David, Bounie & Abel, François & Patrick, Waelbroeck, 2016. "Debit card and demand for cash," Journal of Banking & Finance, Elsevier, vol. 73(C), pages 55-66.

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