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Comparative Analysis of the Changes in Cash Demand in Hungary

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  • Tamás Végsõ

    (Magyar Nemzeti Bank)

Abstract

The strong growth of cash in circulation in Hungary seen in recent years seemingly contradicts the changes in payment habits and can also be interpreted to show that the development of the Hungarian payment system is falling behind relative to other countries in Europe. Placing the Hungarian data in an international context, this study attempts to provide a true and accurate picture of the situation with cash usage in Hungary and uses the relevant literature to present the trends in cash demand observed globally. One important conclusion is that, in terms of their nature, transactional cash demand and cash demand for savings purposes are clearly separated, with the latter primarily responsible for the expansion of the volume of cash on a global scale. While the growth seen in Hungary may be high in European comparison, taking into consideration changes in interest rate levels and GDP it cannot be seen as extreme. Based on international trends, the realistic goal for Hungary should primarily be to decelerate the expansion, as experiences show that a nominal decrease in cash volume requires the long-term and concurrent existence of several factors.

Suggested Citation

  • Tamás Végsõ, 2020. "Comparative Analysis of the Changes in Cash Demand in Hungary," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 19(1), pages 90-118.
    • Handle: RePEc:mnb:finrev:v:19:y:2020:i:1:p:90-118
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    References listed on IDEAS

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    More about this item

    Keywords

    cash demand; cash-to-GDP ratio; payment habits; electronic payments; cash holdings; shadow economy; cashlessness;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • 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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