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​Digital Payments and Cash Demand in the Philippines

Author

Listed:
  • Tristan A. Canare

    (Bangko Sentral ng Pilipinas)

  • Ivory Myka R. Galang

    (Bangko Sentral ng Pilipinas)

Abstract

This study analyzed the relationship between digital payments and demand for cash using data from the Philippines from late 2019 to 2024. Cash demand was measured using two indicators — bank cash withdrawals from the central bank and currency in circulation to GDP ratio. We also used two measures of digital payments. First is a narrow indicator that measures person-to-person (P2P) and person-to merchant (P2M) transactions made through the Philippines’ QR code system. Second is a wider and more encompassing measure that includes, aside from P2P and P2M, more sophisticated and higher-value financial transactions. Using the Auto-Regressive Distributed Lag method, with Instrumental Variable regressions to address possible heterogeneity, we found evidence that (i) overall, digital payments have a negative long-run relationship with total cash demand, (ii) the relationship is stronger with the wider measure of digital payments, (iii) the relationship is driven by large denominations, and (iv) the relationship varies between the two measures of cash demand.

Suggested Citation

  • Tristan A. Canare & Ivory Myka R. Galang, 2026. "​Digital Payments and Cash Demand in the Philippines," BSP Discussion Paper Series 202601, Bangko Sentral ng Pilipinas.
    • Handle: RePEc:bhd:dpaper:202601
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    More about this item

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Systems; Standards; Regimes; Government and the Monetary System
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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