IDEAS home Printed from https://ideas.repec.org/a/mnb/finrev/v22y2023i3p67-96.html
   My bibliography  Save this article

Factors Shaping Euro and Forint Cash Holding Ratios - The Rise of Cash Demand for Savings Purposes from the Turn of the Millennium

Author

Listed:
  • Aniko Bodi-Schubert

    (Magyar Nemzeti Bank)

  • Ildiko Ritzlne Kazimir

    (Magyar Nemzeti Bank)

Abstract

This study reviews the factors shaping forint and euro cash demand for savings purposes by examining the cash holding ratio. Forint and euro cash holding ratios are both rising, which points to an increase in cash savings. According to the results, in the long run, the cash demand for savings purposes is determined by traditional variables such as wealth and yields, along with uncertainty, the price of financial services and the institutional environment. In the short run, the change in uncertainty and the evolution of short interest rates dominate. Crises and the sudden shifts in the institutional environment lead to a shock, with large growth in the cash holding ratio for both currencies.

Suggested Citation

  • Aniko Bodi-Schubert & Ildiko Ritzlne Kazimir, 2023. "Factors Shaping Euro and Forint Cash Holding Ratios - The Rise of Cash Demand for Savings Purposes from the Turn of the Millennium," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 22(3), pages 67-96.
    • Handle: RePEc:mnb:finrev:v:22:y:2023:i:3:p:67-96
    as

    Download full text from publisher

    File URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-22-3-st3-bodi-schubert-ritzlne-kazimir.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Arango-Arango, Carlos A. & Bouhdaoui, Yassine & Bounie, David & Eschelbach, Martina & Hernandez, Lola, 2018. "Cash remains top-of-wallet! International evidence from payment diaries," Economic Modelling, Elsevier, vol. 69(C), pages 38-48.
    2. Hiroshi Fujiki, 2020. "The use of noncash payment methods for regular payments and the household demand for cash: evidence from Japan," The Japanese Economic Review, Springer, vol. 71(4), pages 719-765, October.
    3. Alvarez, Fernando & Lippi, Francesco, 2017. "Cash burns: An inventory model with a cash-credit choice," Journal of Monetary Economics, Elsevier, vol. 90(C), pages 99-112.
    4. Hiroshi Fujiki, 2020. "Correction to: The use of noncash payment methods for regular payments and the household demand for cash: evidence from Japan," The Japanese Economic Review, Springer, vol. 71(4), pages 767-768, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fujiki, Hiroshi, 2020. "Cash demand and financial literacy: A case study using Japanese survey data," Japan and the World Economy, Elsevier, vol. 54(C).
    2. Lo Prete, Anna, 2022. "Digital and financial literacy as determinants of digital payments and personal finance," Economics Letters, Elsevier, vol. 213(C).
    3. Arango-Arango, Carlos A. & Suárez-Ariza, Nicolás, 2020. "Digital payments adoption and the demand for cash: New international evidence," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 14(4), pages 392-410, December.
    4. Madeira, Carlos & Margaretic, Paula, 2022. "The impact of financial literacy on the quality of self-reported financial information," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).
    5. Hiroshi Fujiki, 2023. "Attributes needed for Japan’s central bank digital currency," The Japanese Economic Review, Springer, vol. 74(1), pages 117-175, January.
    6. Esselink, Henk & Gijsel, Lola Hernandez-van, 2017. "The use of cash by households in the euro area," Occasional Paper Series 201, European Central Bank.
    7. Vivien Deak & Istvan Nemecsko & Tamas Vegso, 2022. "Payment Habits of the Hungarian Households in 2020," MNB Occasional Papers 2022/143, Magyar Nemzeti Bank (Central Bank of Hungary).
    8. Bruna Bruno & Marisa Faggini, 2022. "The cashless man: do preferences matter?," Journal of Evolutionary Economics, Springer, vol. 32(5), pages 1525-1544, November.
    9. Fernando Alvarez & Francesco Lippi & Roberto Robatto, 2019. "Cost of Inflation in Inventory Theoretical Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 32, pages 206-226, April.
    10. Greene, Claire & Prescott, Brian & Shy, Oz, 2022. "How people pay each other: Data, theory, and calibrations," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    11. repec:zbw:bofrdp:2015_022 is not listed on IDEAS
    12. Jonker, Nicole & van der Cruijsen, Carin & Bijlsma, Michiel & Bolt, Wilko, 2022. "Pandemic payment patterns," Journal of Banking & Finance, Elsevier, vol. 143(C).
    13. Carlos Arango & Yassine Bouhdaoui & David Bounie & Martina Eschelbach & Lola Hernández, 2013. "Cash Management and Payment Choices: A Simulation Model with International Comparisons," Staff Working Papers 13-53, Bank of Canada.
    14. Kotkowski, Radoslaw & Polasik, Michal, 2021. "COVID-19 pandemic increases the divide between cash and cashless payment users in Europe," Economics Letters, Elsevier, vol. 209(C).
    15. Toshitaka Sekine & Toshiaki Shoji & Tsutomu Watanabe, 2021. "Going Cashless: Evidence from Japan’s Point Reward Program," Working Papers on Central Bank Communication 036, University of Tokyo, Graduate School of Economics.
    16. Magnac, Thierry, 2017. "ATM foreign fees and cash withdrawals," Journal of Banking & Finance, Elsevier, vol. 78(C), pages 117-129.
    17. Brown, Martin & Hentschel, Nicole & Mettler, Hannes & Stix, Helmut, 2022. "The convenience of electronic payments and consumer cash demand," Journal of Monetary Economics, Elsevier, vol. 130(C), pages 86-102.
    18. Antón, Arturo & Hernández-Trillo, Fausto & Ventosa-Santaulària, Daniel, 2021. "(In)Effective tax enforcement and demand for cash," Journal of Macroeconomics, Elsevier, vol. 70(C).
    19. repec:zbw:bofrdp:urn:nbn:fi:bof-201511251450 is not listed on IDEAS
    20. Guerino Ardizzi & Andrea Nobili & Giorgia Rocco, 2020. "A game changer in payment habits: evidence from daily data during a pandemic," Questioni di Economia e Finanza (Occasional Papers) 591, Bank of Italy, Economic Research and International Relations Area.
    21. Codruta Rusu & Helmut Stix, 2017. "Cash and card payments – recent results of the Austrian payment diary survey," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/17, pages 1-35.
    22. Carin van der Cruijsen & Marie-Claire Broekhoff, 2024. "Gender gaps in the world of payments," Working Papers 805, DNB.

    More about this item

    Keywords

    cash demand; error correction model; uncertainty; cash holding ratio;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • 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
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mnb:finrev:v:22:y:2023:i:3:p:67-96. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Morvay Endre (email available below). General contact details of provider: https://edirc.repec.org/data/mnbgvhu.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.