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Payment Systems, Inside Money and Financial Intermediation

Author

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  • Erlend Nier
  • Ouarda Merrouche

    () (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper assesses the impact of introducing an efficient payment system on the amount of credit provided by the banking system. Using payment system reforms in Eastern European countries over the 1995–2005 period as a natural experiment, we find evidence that payments reforms were an important precondition for the credit boom observed in our sample countries. We also find that payment system reforms led to a shift away from cash (outside money) and towards demand deposits (inside money) as a medium of exchange and that this in turn enabled an expansion of credit in the sample countries. These findings have important implications for our understanding of financial intermediation, highlighting the nexus between banks’ role as providers of payment services and as providers of credit.
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Suggested Citation

  • Erlend Nier & Ouarda Merrouche, 2012. "Payment Systems, Inside Money and Financial Intermediation," Post-Print hal-01638082, HAL.
  • Handle: RePEc:hal:journl:hal-01638082
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01638082
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    References listed on IDEAS

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    Cited by:

    1. Felipe Restrepo & Lina Cardona‐Sosa & Philip E. Strahan, 2019. "Funding Liquidity without Banks: Evidence from a Shock to the Cost of Very Short‐Term Debt," Journal of Finance, American Finance Association, vol. 74(6), pages 2875-2914, December.
    2. Itai Agur & Anil Ari & Giovanni Dell'Ariccia, 2019. "Designing Central Bank Digital Currencies," IMF Working Papers 2019/252, International Monetary Fund.
    3. Alexander Lubis & Constantinos Alexiou & Joseph G. Nellis, 2019. "Gauging the Impact of Payment System Innovations on Financial Intermediation: Novel Empirical Evidence from Indonesia," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 18(3), pages 290-338, December.
    4. Restrepo, Felipe, 2019. "The effects of taxing bank transactions on bank credit and industrial growth: Evidence from Latin America," Journal of International Money and Finance, Elsevier, vol. 93(C), pages 335-355.
    5. Pierpaolo Iannozzi, 2013. "Strumenti di pagamento come leva di valorizzazione delle reti: l’esperienza delle fuel cards," ECONOMIA E DIRITTO DEL TERZIARIO, FrancoAngeli Editore, vol. 2013(3), pages 393-420.

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    Keywords

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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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