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An Empirical Study of Cash Payments

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  • Jeanine Kippers

    (De Nederlandsche Bank)

  • Erjen van Nierop

    ()
    (Erasmus University Rotterdam)

  • Richard Paap

    ()
    (Erasmus University Rotterdam)

  • Philip Hans Franses

    ()
    (Erasmus University Rotterdam)

Abstract

Anytime an individual makes a cash payment, s/he needs to think about theamount to be paid, the coins and notes which are available, and the amount ofchange. For central banks and retail stores, for example, it is of interest to un-derstand how this individual choice process works. The literature of currency useconcerns primarily theory, in the sense that, given certain assumptions, one can de-rive an optimal denomination range. There is no empirical study which deals withthe actual use of coins and notes, given a specific denomination range. In this paperwe therefore present such a study, which is based on two rather unique data sets.We use descriptive statistics and a sophisticated model, which is designed for thisspecific purpose, to see whether two basic premises of the theories on optimal rangesare valid. In contrast to the widely accepted assumptions, we find that individualsappear not to pay efficiently and that they are also not indifferent to the use of coinsand notes. In other words, some notes and coins are used less often than expectedgiven the payment situation.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 02-075/4.

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Date of creation: 15 Jul 2002
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Handle: RePEc:dgr:uvatin:20020075

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Web page: http://www.tinbergen.nl

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Cited by:
  1. Kippers, J. & Franses, Ph.H.B.F., 2003. "Do we need all Euro denominations?," Econometric Institute Research Papers EI 2003-39, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  2. Rómulo A. Chumacero E. & Claudio Pardo M. & David Valdés V., 2008. "A Framework for Printing and Minting Plans," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(1), pages 29-59, April.
  3. Franses, Ph.H.B.F. & Kippers, J., 2003. "How do we pay with euro notes? Empirical evidence from Monopoly experiments," Econometric Institute Research Papers EI 2003-32, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  4. Kippers, J. & Franses, Ph.H.B.F., 2003. "An empirical analysis of euro cash payments," Econometric Institute Research Papers EI 2003-25, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  5. Bijwaard, G.E. & Franses, Ph.H.B.F., 2006. "Does rounding matter for payment efficiency?," Econometric Institute Research Papers EI 2006-43, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  6. Bijwaard, Govert E. & Franses, Philip Hans, 2009. "The effect of rounding on payment efficiency," Computational Statistics & Data Analysis, Elsevier, vol. 53(4), pages 1449-1461, February.
  7. Rómulo Chumacero & Claudio Pardo & David Valdés, 2007. "A new framework for the elaboration of bill printing and coining programs," Working Papers Central Bank of Chile 454, Central Bank of Chile.

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