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Narrow money and transaction technology: new disaggregated evidence

  • Columba, Francesco

This paper analyses the effect of transaction technology innovation on narrow money using Italian data disaggregated at provincial level. In particular, this study assesses the impact of the diffusion of ATMs (automated teller machines) and of POS (points of sale), on the demand for currency and on the demand for M1 using a unique data set. We find that transaction technology innovation has a negative effect on the demand for currency in circulation, while its effect on M1 is positive; additionally, heterogeneity in the use of cash within Italy is detected.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12689.

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Date of creation: 08 Jan 2009
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Handle: RePEc:pra:mprapa:12689
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  1. Columba, Francesco, 2008. "The speed of euro adoption," Journal of International Money and Finance, Elsevier, vol. 27(2), pages 249-259, March.
  2. Jussi Snellman & Jukka Vesala & David Humphrey, 2001. "Substitution of Noncash Payment Instruments for Cash in Europe," Journal of Financial Services Research, Springer, vol. 19(2), pages 131-145, April.
  3. Fernando E. Alvarez & Francesco Lippi, 2007. "Financial Innovation and the Transactions Demand for Cash," NBER Working Papers 13416, National Bureau of Economic Research, Inc.
  4. Francesco Columba, 2003. "Transaction Technology Innovation and Demand for Overnight Deposits in Italy," Temi di discussione (Economic working papers) 468, Bank of Italy, Economic Research and International Relations Area.
  5. ten Raa, Thijs & Shestalova, Victoria, 2004. "Empirical evidence on payment media costs and switch points," Journal of Banking & Finance, Elsevier, vol. 28(1), pages 203-213, January.
  6. Robert E. Lucas, Jr., 2000. "Inflation and Welfare," Econometrica, Econometric Society, vol. 68(2), pages 247-274, March.
  7. Duca, John V, 2000. "Financial Technology Shocks and the Case of the Missing M2," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 820-39, November.
  8. Orazio P. Attanasio & Luigi Guiso & Tullio Jappelli, 2002. "The Demand for Money, Financial Innovation, and the Welfare Cost of Inflation: An Analysis with Household Data," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 317-351, April.
  9. Duca, John V. & VanHoose, David D., 2004. "Recent developments in understanding the demand for money," Journal of Economics and Business, Elsevier, vol. 56(4), pages 247-272.
  10. Luca Dedola & Eugenio Gaiotti & Luca Silipo, 2001. "Money demand in the euro area: do national differences matter?," Temi di discussione (Economic working papers) 405, Bank of Italy, Economic Research and International Relations Area.
  11. Casey B. Mulligan & Xavier Sala-I-Martin, 1992. "U.S. Money Demand: Surprising Cross-Sectional Estimates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 285-343.
  12. Paroush, Jacob & Ruthenberg, David, 1986. "Automated teller machines and the share of demand deposits in the money supply: The Israeli Experience," European Economic Review, Elsevier, vol. 30(6), pages 1207-1215, December.
  13. Daniels, Kenneth N & Murphy, Neil B, 1994. "The Impact of Technological Change on the Currency Behavior of Households: An Empirical Cross-Section Study," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(4), pages 867-74, November.
  14. Judson, Ruth A. & Porter, Richard D., 2004. "Currency demand by federal reserve cash office: what do we know?," Journal of Economics and Business, Elsevier, vol. 56(4), pages 273-285.
  15. Gene Amromin & Sujit Chakravorti, 2009. "Whither Loose Change? The Diminishing Demand for Small-Denomination Currency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(2-3), pages 315-335, 03.
  16. Focarelli, Dario, 2005. "Bootstrap bias-correction procedure in estimating long-run relationships from dynamic panels, with an application to money demand in the euro area," Economic Modelling, Elsevier, vol. 22(2), pages 305-325, March.
  17. Mathias Drehmann & Charles Goodhart & Malte Krueger, 2002. "The challenges facing currency usage: will the traditional transaction medium be able to resist competition from the new technologies?," Economic Policy, CEPR;CES;MSH, vol. 17(34), pages 193-228, 04.
  18. Whitesell, William C, 1989. "The Demand for Currency versus Debitable Accounts: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(2), pages 246-57, May.
  19. Whitesell, William C, 1992. "Deposit Banks and the Market for Payment Media," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(4), pages 483-98, November.
  20. Hancock, Diana & Humphrey, David B., 1997. "Payment transactions, instruments, and systems: A survey," Journal of Banking & Finance, Elsevier, vol. 21(11-12), pages 1573-1624, December.
  21. Fischer, Björn & Köhler, Petra & Seitz, Franz, 2004. "The demand for euro area currencies: past, present and future," Working Paper Series 0330, European Central Bank.
  22. Pedro Teles & Ruilin Zhou, 2005. "A stable money demand: Looking for the right monetary aggregate," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 50-63.
  23. Angelini, P. & Hendry, D.F. & Rinaldi, R., 1993. "An Econometric Analysis of Money Demand in Italy," Papers 219, Banca Italia - Servizio di Studi.
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