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Technological change and the households' demand for currency

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  • Francesco Lippi

    (University of Sassari, EIEF and CEPR)

  • Alessandro Secchi

    (Bank of Italy)

Abstract

It is shown that accounting for technology variations, across households and periods, is important to obtain theoretically consistent estimates of the demand for currency. An inventory model is presented where the withdrawal technology is explicitly modeled. Both the level and the interest rate elasticity of cash holdings depend on the withdrawal technology available to households. Empirical proxies for the household withdrawal technology, based on the diffusion of cash withdrawal points measured at city level, are used to test the model predictions on a panel of Italian household data over the 1993-2004 period.

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Bibliographic Info

Paper provided by Einaudi Institute for Economics and Finance (EIEF) in its series EIEF Working Papers Series with number 0801.

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Length: 28 pages
Date of creation: 2008
Date of revision: Oct 2008
Handle: RePEc:eie:wpaper:0801

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  1. Fiorella De Fiore & Pedro Teles, 2002. "The optimal mix of taxes on money, consumption and income," Working Paper Series, Federal Reserve Bank of Chicago WP-02-03, Federal Reserve Bank of Chicago.
  2. Alvarez, Fernando E & Lippi, Francesco, 2007. "Financial Innovation and the Transactions Demand for Cash," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6472, C.E.P.R. Discussion Papers.
  3. Orazio Attanasio & Luigi Guiso & Tuillo Jappelli, 1998. "The Demand for Money, Financial Innovation, and the Welfare Cost of Inflation: An Analysis with Household Data," NBER Working Papers 6593, National Bureau of Economic Research, Inc.
  4. Lucas, Robert E., 1988. "Money demand in the United States: A quantitative review," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 29(1), pages 137-167, January.
  5. Helmut Stix, 2004. "How Do Debit Cards Affect Cash Demand? Survey Data Evidence," Economic Change and Restructuring, Springer, Springer, vol. 31(2), pages 93-115, June.
  6. John V. Duca & William C. Whitesell, 1991. "Credit cards and money demand: a cross-sectional study," Research Paper, Federal Reserve Bank of Dallas 9112, Federal Reserve Bank of Dallas.
  7. Daniels, Kenneth N & Murphy, Neil B, 1994. "The Impact of Technological Change on the Currency Behavior of Households: An Empirical Cross-Section Study," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 26(4), pages 867-74, November.
  8. Robert E. Lucas, Jr., 2000. "Inflation and Welfare," Econometrica, Econometric Society, Econometric Society, vol. 68(2), pages 247-274, March.
  9. Puhani, Patrick A, 2000. " The Heckman Correction for Sample Selection and Its Critique," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 14(1), pages 53-68, February.
  10. Allan H. Meltzer, 1963. "The Demand for Money: The Evidence from the Time Series," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 71, pages 219.
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Cited by:
  1. Schuh, Scott & Stavins, Joanna, 2010. "Why are (some) consumers (finally) writing fewer checks? The role of payment characteristics," Journal of Banking & Finance, Elsevier, Elsevier, vol. 34(8), pages 1745-1758, August.
  2. John Bagnall & David Bounie & Kim P. Huynh & Anneke Kosse & Tobias Schmidt & Scott Schuh & Helmut Stix, 2014. "Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data," Working Papers, Oesterreichische Nationalbank (Austrian Central Bank) 192, Oesterreichische Nationalbank (Austrian Central Bank).
  3. Ardizzi, Guerino, 2013. "Card versus cash: empirical evidence of the impact of payment card interchange fees on end users’ choice of payment methods," MPRA Paper 48088, University Library of Munich, Germany, revised 25 May 2013.
  4. Susana da Silva Brito & Fátima Teresa Sol Murta, 2012. "The Effect of the ATM and the POS in the Demand for Money in Europe," Book Chapters, Institute of Economic Sciences.
  5. von Kalckreuth, Ulf & Schmidt, Tobias & Stix, Helmut, 2011. "Using cash to monitor liquidity: Implications for payments, currency demand and withdrawal behavior," Discussion Paper Series 1: Economic Studies 2011,22, Deutsche Bundesbank, Research Centre.
  6. Alvarez, Fernando & Lippi, Francesco, 2013. "The demand of liquid assets with uncertain lumpy expenditures," Journal of Monetary Economics, Elsevier, Elsevier, vol. 60(7), pages 753-770.
  7. Von Kalckreuth, Ulf & Schmidt, Tobias & Stix, Helmut, 2009. "Choosing and using payment instruments: evidence from German microdata," Working Paper Series, European Central Bank 1144, European Central Bank.
  8. Bar-Ilan, Avner & Marion, Nancy, 2013. "Demand for cash with intra-period endogenous consumption," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 37(12), pages 2668-2678.
  9. Aleksander Berentsen & Samuel Huber & Alessandro Marchesiani, 2014. "Financial innovations, money demand, and the welfare cost of inflation," ECON - Working Papers, Department of Economics - University of Zurich 136, Department of Economics - University of Zurich.
  10. Yassine Bouhdaoui & David Bounie, 2012. "Modeling the Share of Cash Payments in the Economy: An Application to France," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 8(4), pages 175-195, December.
  11. Hiroshi Fujiki & Migiwa Tanaka, 2009. "Demand for Currency, New Technology and the Adoption of Electronic Money: Evidence Using Individual Household Data," IMES Discussion Paper Series 09-E-27, Institute for Monetary and Economic Studies, Bank of Japan.

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