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Retail payments and economic growth

  • Hasan, Iftekhar

    ()

    (Fordham University and Bank of Finland)

  • De Renzis, Tania

    ()

    (Central Bank of Malta)

  • Schmiedel , Heiko

    ()

    (European Central Bank)

This paper examines the fundamental relationship between retail payments and overall economic growth. Using data from across 27 European markets over the period 1995–2009, the results confirm that migration to efficient electronic retail payments stimulates overall economic growth, consumption and trade. Among different payment instruments, this relationship is strongest for card payments, followed by credit transfers and direct debits. Cheque payments are found to have a relatively low macroeconomic impact. Retail payment transaction technology itself is also associated positively to real economic aggregates. We also show that initiatives to integrate and harmonise retail payment markets foster trade and consumption and thereby have a beneficial effect for whole economy. Additionally, the findings reveal that the impact of retail payments on economic growth is more pronounced in euro area countries. Our findings are robust to different regression specifications. The study supports the adoption of policies promoting a swift migration to efficient and harmonised electronic payment instruments.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/BoF_DP_1219.pdf
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Paper provided by Bank of Finland in its series Research Discussion Papers with number 19/2012.

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Length: 37 pages
Date of creation: 20 Apr 2012
Date of revision:
Handle: RePEc:hhs:bofrdp:2012_019
Contact details of provider: Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/

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  1. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
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  17. J. Barkley Rosser, 2009. "Introduction," Chapters, in: Handbook of Research on Complexity, chapter 1 Edward Elgar.
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