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An empirical analysis of euro cash payments

  • Franses, Philip Hans
  • Kippers, Jeanine

If the denominational structure of the euro is used in an optimal way, there should be no preferences for using certain coins and notes. In Kippers et al. (2003) it is documented that the Dutch public did have certain preferences concerning the Dutch guilder, in the sense that some notes and coins were used less often than expected. With the advent of the euro, it is now of interest to examine whether these preferences also exist for euro coins and notes, also as the denominational structure of the guilder was 1-2?-5, while for the euro it is now 1-2-5. In this paper we use two new and rather unique data sets for the Netherlands to empirically examine if the euro range is used in an optimal way. Using a statistical model, specifically designed for this purpose, we find that the Dutch public does not seem to have preferences for certain denominations. Hence, the task of paying with cash has become easier for Dutch consumers.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 51 (2007)
Issue (Month): 8 (November)
Pages: 1985-1997

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Handle: RePEc:eee:eecrev:v:51:y:2007:i:8:p:1985-1997
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  1. Van Hove, Leo, 2001. "Optimal Denominations for Coins and Bank Notes: In Defense of the Principle of Least Effort," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(4), pages 1015-21, November.
  2. Leo van Hove, 2004. "Electronic Purses in Euroland: Why do Penetration and Usage Rates differ?," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  3. Cramer, J. S., 1983. "Currency by denomination," Economics Letters, Elsevier, vol. 12(3-4), pages 299-303.
  4. Humphrey, David B & Kim, Moshe & Vale, Bent, 2001. "Realizing the Gains from Electronic Payments: Costs, Pricing, and Payment Choice," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 216-34, May.
  5. Jeanine Kippers & Erjen Nierop & Richard Paap & Philip Hans Franses, 2003. "An Empirical Study of Cash Payments," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 57(4), pages 484-508.
  6. Telser, L. G., 1995. "Optimal denominations for coins and currency," Economics Letters, Elsevier, vol. 49(4), pages 425-427, October.
  7. Sheri M. Markose & Yiing Jia Loke, 2000. "Network effects on Cash-Card Substitution in Transactions and Low Interest Rate Regimes," Economics Discussion Papers 507, University of Essex, Department of Economics.
  8. Robert B. Avery & Gregory E. Elliehausen & Arthur B. Kennickell & Paul A. Spindt, 1986. "The use of cash and transaction accounts by American families," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Feb, pages 87-108.
  9. Sumner, Scott, 1993. "Privatizing the Mint," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 13-29, February.
  10. Mark A. Wynne, 1997. "More on optimal denominations for coins and currency," Working Papers 9702, Federal Reserve Bank of Dallas.
  11. Boeschoten, W C & Fase, M M G, 1989. "The Way We Pay with Money," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(3), pages 319-26, July.
  12. Leo Van Hove, 2004. "Electronic Purses in Euroland: Why do Penetration and Usage Rates differ?," SUERF Studies, SUERF - The European Money and Finance Forum, number 2004/4 edited by Morten Balling.
  13. van Hove, Leo & Heyndels, Bruno, 1996. "On the optimal spacing of currency denominations," European Journal of Operational Research, Elsevier, vol. 90(3), pages 547-552, May.
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