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An Analysis of the Demand forCash in Korea (in Korean)

Author

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  • Byoung Hark Yoo

    (Institute for Monetary and Economic Research, The Bank of Korea)

Abstract

The ratio of cash to consumption fell sharply in Korea in 1999 and has since stayed well below its long term trend. This paper shows that this sudden one-time decrease in cash demand was due to an increase in credit card use and that the rise in credit card payments resulted from a tax policy first introduced in 1999 that provided tax deductions for credit card holders on their credit card payments. Without the policy, the ratio of cash to consumption would have remained around its long term average. Meanwhile, the use of 100,000-won cashier's cheques, which circulate widely as quasi-cash in Korea, has decreased over the long-term. The empirical analysis presented shows that the demand for cashier's checks has been declining as the use of electronic payments expands.

Suggested Citation

  • Byoung Hark Yoo, 2007. "An Analysis of the Demand forCash in Korea (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 13(1), pages 150-179, March.
    • Handle: RePEc:bok:journl:v:13:y:2007:i:1:p:150-179
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    More about this item

    Keywords

    Cash Demand; Credit Cards; Non-cash Payment;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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