Within by the electronic money definition, the plastics have a significant place, both the debit cards and the new option, even in the experimental stage known as the electronic purse or prepayment. The advanced technological changes, especially the incorporated microchips into plastics and the internet have facilitated the payment system. These circumstances (the facilities with plastics) have generated the acceptation on the debit card and the electronic purse by the people, and it has altered and transformed several habits deeply rooted in our customs, in particular in Latin America. The goal of this work is to develop a demand model of bills and coins model, such as the Baumol-Tobin inventory model. It includes the option of the buyers to buy their items with cash or debit cards. The sellers cash demand is added to the model because it is a necessary condition in order to find the solution. The sellers could accept debit card only if they have a machine capable of making the necessary transactions between the bank account’s client and bank account’s seller. If they don’t have a machine, they will only accept cash. If we incorporate the sellers cash demand, we will be able to find the proportion of debit card expenditure. This share depends on the quantity of sellers with debit card machine. The benefit of this model is that we can study the debit cards as substitution of cash.
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Article provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its journal Cuadernos de Economía.
Find related papers by JEL classification: E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
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