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The spread of branch banking and the demand for cash in post-war Germany

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  • Malte Krüger

Abstract

The period from the 1950s to the late 1970s saw an almost uniform decline of cash-to-GDP ratios in industrial countries. A closer look at the German payment system suggests that the factor causing such a change has been the shift towards cashless wage payments. In this period, in Germany, the branch network of the banks expanded significantly and at the end of the period almost all economically active persons had a current account. This change was triggered by rising wages and incomes. Rising wages increased the burden of weekly wage payments in cash, and rising incomes made the average earner more interesting for banks. Moreover, regulation and de-regulation, triggering both, price and non-price competition, may also have played a role. Technological change has not been an independent driver. The introduction of cashless wage payments has not only affected the payment behavior but also the savings behaviour of households. These changes were evolutionary rather than revolutionary, however. So, even though the cash-to-GDP ratio declined in this period, absolute amounts of real cash per capita were still rising.

Suggested Citation

  • Malte Krüger, 2016. "The spread of branch banking and the demand for cash in post-war Germany," ROME Working Papers 201609, ROME Network.
    • Handle: RePEc:rmn:wpaper:201609
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    References listed on IDEAS

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    1. Cronin, David & McGuinness, Anne, 2010. "Retail Payment Practices. How They Have Evolved in Recent Times and Where They Might Be Going," Quarterly Bulletin Articles, Central Bank of Ireland, pages 56-82, April.
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    More about this item

    Keywords

    retail payments; demand for cash; innovation;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • L89 - Industrial Organization - - Industry Studies: Services - - - Other
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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