Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197899 
Year of Publication: 
2018
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2018-46
Publisher: 
Bank of Canada, Ottawa
Abstract: 
Using an exclusive data set of payment times for retail transactions made in Canada, I show that cash is the most time-efficient method of payment (MOP) when compared with payments by debit and credit cards. I model payment efficiency using Cox proportional hazard models, accounting for consumer choice of MOP. I propose two instruments to identify and estimate the causal relationship between MOP and payment time: (1) the value of the transaction, and (2) the duration of the payment preceding the one under observation. Discounting consumer selection underestimates the efficiency of cash relative to cards. Overall, the efficiency of MOPs is an important component of the private and social costs of making and accepting payments. The efficiency of cash helps explain its continued use in Canada, which is motivated by its low cost in terms of payment time for consumers and merchants.
Subjects: 
Bank notes
Econometric and statistical methods
Payment clearing and settlement systems
JEL: 
C25
C36
C41
D23
E41
E42
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.