Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154307
Authors: 
Arango, Carlos
Bouhdaoui, Yassine
Bounie, David
Eschelbach, Martina
Hernández, Lola
Year of Publication: 
2016
Series/Report no.: 
ECB Working Paper 1874
Abstract: 
Despite various payment innovations, today, cash is still heavily used to pay for low-value purchases. This paper proposes a simulation model based on two optimal cash management and payment policies in the payments economics literature to explain cash usage. First, cash is preferred to other payment instruments whenever consumers have enough balances at hand. Second, it is optimal for consumers to hold a stock of cash for precautionary reasons. Exploiting survey payment diaries from Canada, France, Germany and the Netherlands, the results of the simulations show that both optimal policies are well suited to understand the high shares of low-value cash payments in Canada, France and Germany. Yet, they do not perform as well in the case of the Netherlands, overestimating the share of low-value cash payments. We discuss how the differences in payment markets across countries may explain the limitations of the two optimal policies.
Subjects: 
cash management
international comparison
payment choices
JEL: 
C61
E41
E47
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-1687-5
Document Type: 
Working Paper

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