IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-01638082.html
   My bibliography  Save this paper

Payment Systems, Inside Money and Financial Intermediation

Author

Listed:
  • Erlend Nier
  • Ouarda Merrouche

    (EconomiX - 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.

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
    DOI: 10.1016/j.jfi.2012.01.002
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Cottarelli, Carlo & Dell'Ariccia, Giovanni & Vladkova-Hollar, Ivanna, 2005. "Early birds, late risers, and sleeping beauties: Bank credit growth to the private sector in Central and Eastern Europe and in the Balkans," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 83-104, January.
    2. Berlin, Mitchell & Mester, Loretta J, 1999. "Deposits and Relationship Lending," The Review of Financial Studies, Society for Financial Studies, vol. 12(3), pages 579-607.
    3. Loretta J. Mester & Leonard I. Nakamura & Micheline Renault, 2007. "Transactions Accounts and Loan Monitoring," The Review of Financial Studies, Society for Financial Studies, vol. 20(3), pages 529-556.
    4. Douglas W. Diamond & Raghuram G. Rajan, 2006. "Money in a Theory of Banking," American Economic Review, American Economic Association, vol. 96(1), pages 30-53, March.
    5. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    6. Agenor, Pierre-Richard & Aizenman, Joshua & Hoffmaister, Alexander W., 2004. "The credit crunch in East Asia: what can bank excess liquid assets tell us?," Journal of International Money and Finance, Elsevier, vol. 23(1), pages 27-49, February.
    7. Marianne Bertrand & Antoinette Schoar & David Thesmar, 2007. "Banking Deregulation and Industry Structure: Evidence from the French Banking Reforms of 1985," Journal of Finance, American Finance Association, vol. 62(2), pages 597-628, April.
    8. Anil K. Kashyap & Raghuram Rajan & Jeremy C. Stein, 2002. "Banks as Liquidity Providers: An Explanation for the Coexistence of Lending and Deposit‐taking," Journal of Finance, American Finance Association, vol. 57(1), pages 33-73, February.
    9. Bernanke, Ben S & Blinder, Alan S, 1988. "Credit, Money, and Aggregate Demand," American Economic Review, American Economic Association, vol. 78(2), pages 435-439, May.
    10. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(3), pages 393-414.
    11. , & Yorulmazer, Tanju, 2013. "Liquidity hoarding," Theoretical Economics, Econometric Society, vol. 8(2), May.
    12. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 717-737.
    13. Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2003. "The Great Depression and the Friedman-Schwartz hypothesis," Proceedings, Federal Reserve Bank of Cleveland, pages 1119-1215.
    14. Barth,James R. & Caprio,Gerard & Levine,Ross, 2008. "Rethinking Bank Regulation," Cambridge Books, Cambridge University Press, number 9780521709309.
    15. Enrica Detragiache & Thierry Tressel & Poonam Gupta, 2008. "Foreign Banks in Poor Countries: Theory and Evidence," Journal of Finance, American Finance Association, vol. 63(5), pages 2123-2160, October.
    16. Gale, Douglas & Yorulmazer, Tanju, 2011. "Liquidity hoarding," LSE Research Online Documents on Economics 119067, London School of Economics and Political Science, LSE Library.
    17. International Monetary Fund, 1994. "The Payments Systems Reforms and Monetary Policy in Emerging Market Economies in Central and Eastern Europe," IMF Working Papers 1994/013, International Monetary Fund.
    18. Kenneth Rogoff, 1998. "Blessing or curse? Foreign and underground demand for euro notes," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 13(26), pages 262-303.
    19. Boyd, John H. & Levine, Ross & Smith, Bruce D., 2001. "The impact of inflation on financial sector performance," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 221-248, April.
    20. Hugh Rockoff, 1993. "The Meaning of Money in the Great Depression," NBER Historical Working Papers 0052, National Bureau of Economic Research, Inc.
    21. Mr. Scott Roger, 2009. "Inflation Targeting at 20 - Achievements and Challenges," IMF Working Papers 2009/236, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Agur, Itai & Ari, Anil & Dell’Ariccia, Giovanni, 2022. "Designing central bank digital currencies," Journal of Monetary Economics, Elsevier, vol. 125(C), pages 62-79.
    2. 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.
    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. Sinelnikova-Muryleva, Elena (Синельников-Мурылева, Елена), 2018. "Analysis of the Consequences of the Development of Payment Systems for Monetary Policy in the Context of Deepening Financial Markets [Анализ Последствий Развития Платежных Систем Для Денежно-Кредит," Working Papers 031813, Russian Presidential Academy of National Economy and Public Administration.
    6. 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.
    7. Maria Rosa Borges & Lauriano Ulica & Mariya Gubareva, 2020. "Systemic risk in the Angolan interbank payment system – a network approach," Applied Economics, Taylor & Francis Journals, vol. 52(45), pages 4900-4912, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Committee, Nobel Prize, 2022. "Financial Intermediation and the Economy," Nobel Prize in Economics documents 2022-2, Nobel Prize Committee.
    2. Berger, Allen N. & Sedunov, John, 2017. "Bank liquidity creation and real economic output," Journal of Banking & Finance, Elsevier, vol. 81(C), pages 1-19.
    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. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95.
    5. Demirguc-Kunt, Asli, 2006. "Finance and economic development : policy choices for developing countries," Policy Research Working Paper Series 3955, The World Bank.
    6. Bouwman, Christa H. S., 2013. "Liquidity: How Banks Create It and How It Should Be Regulated," Working Papers 13-32, University of Pennsylvania, Wharton School, Weiss Center.
    7. von Peter, Goetz, 2009. "Asset prices and banking distress: A macroeconomic approach," Journal of Financial Stability, Elsevier, vol. 5(3), pages 298-319, September.
    8. Dong Beom Choi & Hyun-Soo Choi, 2021. "The Effect of Monetary Policy on Bank Wholesale Funding," Management Science, INFORMS, vol. 67(1), pages 388-416, January.
    9. Mark Egan & Stefan Lewellen & Adi Sunderam, 2017. "The Cross Section of Bank Value," NBER Working Papers 23291, National Bureau of Economic Research, Inc.
    10. James B. Ang, 2008. "A Survey Of Recent Developments In The Literature Of Finance And Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 536-576, July.
    11. Bossone, Biagio, 2001. "Do banks have a future?: A study on banking and finance as we move into the third millennium," Journal of Banking & Finance, Elsevier, vol. 25(12), pages 2239-2276, December.
    12. Brunnermeier, Markus K. & Oehmke, Martin, 2013. "Bubbles, Financial Crises, and Systemic Risk," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1221-1288, Elsevier.
    13. Alessandro Giovannini & Maurizio Iacopetta & Raoul Minetti, 2013. "Financial Markets, Banks, and Growth : Disentangling the links," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 105-147.
    14. 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.
    15. Douglas W. Diamond & Raghuram G. Rajan, 2005. "Liquidity Shortages and Banking Crises," Journal of Finance, American Finance Association, vol. 60(2), pages 615-647, April.
    16. Thorsten Beck & Robin Döttling & Thomas Lambert & Mathijs Dijk, 2023. "Liquidity creation, investment, and growth," Journal of Economic Growth, Springer, vol. 28(2), pages 297-336, June.
    17. Hanson, Samuel G. & Shleifer, Andrei & Stein, Jeremy C. & Vishny, Robert W., 2015. "Banks as patient fixed-income investors," Journal of Financial Economics, Elsevier, vol. 117(3), pages 449-469.
    18. Schnabl, Philipp & Savov, Alexi & Drechsler, Itamar, 2018. "Banking on Deposits: Maturity Transformation without Interest Rate Risk," CEPR Discussion Papers 12950, C.E.P.R. Discussion Papers.
    19. Lars Norden & Martin Weber, 2010. "Funding Modes of German Banks: Structural Changes and their Implications," Journal of Financial Services Research, Springer;Western Finance Association, vol. 38(2), pages 69-93, December.
    20. Ms. Corinne C Delechat & Ms. Camila Henao Arbelaez & Ms. Priscilla S Muthoora & Svetlana Vtyurina, 2012. "The Determinants of Banks' Liquidity Buffers in Central America," IMF Working Papers 2012/301, International Monetary Fund.

    More about this item

    Keywords

    [No keyword available];

    JEL classification:

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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-01638082. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.