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An empirical analysis of euro cash payments

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  • Franses, Philip Hans
  • Kippers, Jeanine

Abstract

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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Suggested Citation

  • Franses, Philip Hans & Kippers, Jeanine, 2007. "An empirical analysis of euro cash payments," European Economic Review, Elsevier, vol. 51(8), pages 1985-1997, November.
  • Handle: RePEc:eee:eecrev:v:51:y:2007:i:8:p:1985-1997
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    1. Telser, L. G., 1995. "Optimal denominations for coins and currency," Economics Letters, Elsevier, vol. 49(4), pages 425-427, October.
    2. 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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    5. 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 1015-1021, November.
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    7. Sumner, Scott, 1993. "Privatizing the Mint," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 13-29, February.
    8. 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.
    9. Sheri M. Markose & Yiing Jia Loke, 2003. "Network Effects On Cash-Card Substitution In Transactions And Low Interest Rate Regimes," Economic Journal, Royal Economic Society, vol. 113(487), pages 456-476, April.
    10. 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.
    11. 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.
    12. 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.
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    Cited by:

    1. Joshi Harit & Mukherjee, Saral, 2017. "Transitions in currency denomination structure as supply disruption and demand distortion: Efficiency, Effectiveness and Bullwhip," IIMA Working Papers WP 2017-05-02, Indian Institute of Management Ahmedabad, Research and Publication Department.
    2. Adriaan R. Soetevent, 2011. "Payment Choice, Image Motivation and Contributions to Charity: Evidence from a Field Experiment," American Economic Journal: Economic Policy, American Economic Association, vol. 3(1), pages 180-205, February.
    3. repec:eee:jmacro:v:52:y:2017:i:c:p:252-267 is not listed on IDEAS
    4. Bouhdaoui, Y. & Bounie, D., 2012. "Efficient payments: How much do they cost for the Central Bank?," Economic Modelling, Elsevier, vol. 29(5), pages 1579-1584.
    5. Bouhdaoui, Y. & Bounie, D. & Van Hove, L., 2011. "Central banks and their banknote series: The efficiency-cost trade-off," Economic Modelling, Elsevier, vol. 28(4), pages 1482-1488, July.
    6. Carlos A. Arango A. & Martha Misas A. & Juan Nicolás Hernández, 2004. "La Demanda de Especies Monetarias en Colombia: Estructura y Pronóstico," Borradores de Economia 309, Banco de la Republica de Colombia.
    7. Bouhdaoui, Y. & Bounie, D. & François, A., 2014. "Convenient prices, cash payments and price rigidity," Economic Modelling, Elsevier, vol. 41(C), pages 329-337.

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