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Cash management and choice of payment media: a critical survey of the theory

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  • C.K. Folkertsma
  • G.E. Hebbink
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    Abstract

    This report addresses the question whether economic theory can explain the choice of payment media for over-the-counter payments. A survey of the literature reveals that most of the existing microeconomic models are limited to the explanation of the size of cash balance. Only two models describe the optimal choice between different modes of payment such as cash payment, payment by electronic money and debitcard payment. One of these approaches has been extended in this report, in order to study the effects on transaction balances and optimal mode of payment, for exmple, caused by interest rate changes or the introduction of new payment media.

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    File URL: http://www.dnb.nl/binaries/wo0532_eng_tcm46-145875.pdf
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    Bibliographic Info

    Paper provided by Netherlands Central Bank, Research Department in its series WO Research Memoranda (discontinued) with number 532.

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    Date of creation: 1998
    Date of revision:
    Handle: RePEc:dnb:wormem:532

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    Related research

    Keywords: cash management; demand for money; payments behaviour;

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    Cited by:
    1. Pippow Ingo & Schoder Detlef, 2002. "The Demand for Stored Value Payment Instruments," Microeconomics, EconWPA 0204002, EconWPA.

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