IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/5281.html
   My bibliography  Save this paper

Central Banks and Payment Instruments: a Serious Case of Schizophrenia

Author

Listed:
  • VAN HOVE, Leo

Abstract

This article analyses the competition between cash and payment cards against the backdrop of the dual role of central banks - as issuers of cash and as institutions with a mandate to foster the efficiency of payment systems in general. It is argued that this dual role results in a number of policy dilemmas, namely concerning pricing, traceability of banknotes and the choice of denominations of coins and banknotes. On a general level, the article argues that central banks should place greater emphasis on improving the efficiency of retail payments and less on protecting their self-interest. More concretely, the article repeats the suggestion - originally put forward in VAN HOVE & VUCHELEN (1996) - that the ECB should place the upper limit of its banknote series at EUR 50 instead of EUR 500. It is also argued that policy makers should explicitly foster the use of cost-based pricing and in particular create a legal environment that makes it possible for commercial banks to start using it.

Suggested Citation

  • VAN HOVE, Leo, 2007. "Central Banks and Payment Instruments: a Serious Case of Schizophrenia," MPRA Paper 5281, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:5281
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/5281/1/MPRA_paper_5281.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. 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, April.
    2. Kari Kemppainen & Sinikka Salo, 2006. "Promoting Integration of European Retail Payment Systems: Role of Competition, Cooperation and Regulation," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
    3. Martin Handig & Robert Holzfeind, 2007. "Euro Banknotes in Circulation and the Allocation of Monetary Income within the Eurosystem," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 150-163.
    4. Nicole Jonker & Bram Scholten & Marco Wind (DNB) & Martijn van Emmerik & Marieke van der Hoeven (TNO Human Factors), 2006. "Counterfeit or genuine: can you tell the difference?," DNB Working Papers 121, Netherlands Central Bank, Research Department.
    5. Humphrey, David B & Kim, Moshe & Vale, Bent, 2001. "Realizing the Gains from Electronic Payments: Costs, Pricing, and Payment Choice," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 216-234, May.
    6. W. Bolt, 2003. "Retail Payments in the Netherlands: some Facts and Some Theory," WO Research Memoranda (discontinued) 722, Netherlands Central Bank, Research Department.
    7. Anton Schautzer, 2007. "Cash Logistics in Austria and the Euro Area," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 138-149.
    8. Verdier, Marianne, 2006. "Retail Payment Systems: What can we Learn from Two-Sided Markets?," MPRA Paper 2606, University Library of Munich, Germany.
    9. Leo Van Hove, 1999. "Electronic money and the network externalities theory: lessons for real life," Netnomics, Springer, vol. 1(2), pages 137-171, October.
    10. Peter Mooslechner & Helmut Stix & Karin Wagner, 2006. "How Are Payments Made in Austria?," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 111-134.
    11. Willem H. Buiter, 2005. "New Developments in Monetary Economics: Two ghosts, Two Eccentricities, a Fallacy, a Mirage and a Mythos," Economic Journal, Royal Economic Society, vol. 115(502), pages 1-31, March.
    12. Wilko Bolt, 2006. "Retail Payments in the Netherlands: Facts and Theory," De Economist, Springer, vol. 154(3), pages 345-372, September.
    13. N/A, 1996. "Note:," Foreign Trade Review, , vol. 31(1-2), pages 1-1, January.
    14. Nicole Jonker & Thijs Kettenis, 2007. "Explaining cash usage in the Netherlands: the effect of electronic payment instruments," DNB Working Papers 136, Netherlands Central Bank, Research Department.
    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. repec:eee:jmacro:v:52:y:2017:i:c:p:252-267 is not listed on IDEAS
    2. Seitz, Franz & Krueger, Malte, 2017. "The Blessing of Cash," International Cash Conference 2017 – War on Cash: Is there a Future for Cash? 162911, Deutsche Bundesbank.
    3. Bouhdaoui, Y. & Bounie, D. & Van Hove, L., 2013. "When do plastic bills lower the bill for the central bank? A model and estimates for the U.S," Journal of Policy Modeling, Elsevier, vol. 35(1), pages 45-60.
    4. Krueger, Malte, 2009. "The Pricing of Payments," MPRA Paper 24759, University Library of Munich, Germany.

    More about this item

    Keywords

    payment instruments; central banks; cash; banknotes; payment cards; public policy; efficiency;

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:5281. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.