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The Decline in Currency Use at a National Retail Chain

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  • Zhu Wang
  • Alexander L. Wolman

Abstract

We bring new evidence to bear on the contributions of changing transaction sizes and changing demographics to the decline in cash payments at a national retail chain. On average, across the thousands of store locations in our study, the share of cash transactions fell by 8.6 percentage points from February 2011 to February 2015. Our statistical model attributes approximately 1.3 percentage points of that decline to increasing transaction sizes. Changes in demographic and other location-specific variables contribute between 0.5 and 1.3 percentage points, so our analysis attributes approximately three-quarters of the decline in cash use to a pure time effect. The time effect stands in for reductions in the cost and increases in the availability and security of debit and credit cards, improvements in consumers' perceptions of cards, and any other factors omitted from our analysis.

Suggested Citation

  • Zhu Wang & Alexander L. Wolman, 2018. "The Decline in Currency Use at a National Retail Chain," Economic Quarterly, Federal Reserve Bank of Richmond, issue 2Q, pages 53-77.
  • Handle: RePEc:fip:fedreq:00058
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    File URL: https://www.richmondfed.org/-/media/richmondfedorg/publications/research/economic_quarterly/2018/q2/wolman.pdf
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    References listed on IDEAS

    as
    1. Wang, Zhu & Wolman, Alexander L., 2016. "Payment choice and currency use: Insights from two billion retail transactions," Journal of Monetary Economics, Elsevier, vol. 84(C), pages 94-115.
    2. Papke, Leslie E & Wooldridge, Jeffrey M, 1996. "Econometric Methods for Fractional Response Variables with an Application to 401(K) Plan Participation Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 619-632, Nov.-Dec..
    3. Maarten L. Buis, 2008. "FMLOGIT: Stata module fitting a fractional multinomial logit model by quasi maximum likelihood," Statistical Software Components S456976, Boston College Department of Economics, revised 16 Feb 2017.
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    Keywords

    currency; transactions; retail payments;

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