This paper analyzes how EFT-POS payments and ATM withdrawals affect purse cash demand. In particular, survey data about Austrian individuals are employed to estimate a cash demand equation which takes account of sample selection effects. The results reveal that purse cash demand is significantly affected by debit card usage and that there are significant differences in cash demand for individuals with different debit card usage frequencies. For example, the point estimates imply that individuals who pay frequently with their debit card hold about 20% less purse cash than all others while frequent ATM withdrawals are associated with about 18% less purse cash demand. Due to the relative small share of frequent users, currently, aggregate purse cash demand is not very strongly affected by EFT-POS payments. However, if usage behavior shifts towards higher usage frequencies, then the findings of this study suggest that purse cash demand will decrease substantially.
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Paper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number
82.
Find related papers by JEL classification: 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 D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
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