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Financial Literacy and Cash Holdings in Turkey

Author

Listed:
  • Mustafa Recep Bilici
  • Saygin Cevik

Abstract

This paper examines the effect of financial literacy level on cash holdings in Turkey. Utilizing the Methods of Payment Survey, which includes both financial literacy and cash-related data, we first investigate the fundamentals of financial literacy in Turkey. Based on the performance on financial literacy questions, we categorize respondents into three groups. Subsequently, we analyze how cash holding behavior differs among financial literacy groups. Our results reveal that financially literate respondents tend to hold less cash on hand and store more cash elsewhere. Moreover, card ownership increases through financial literacy and the change in payment behavior of financially literate respondents is more significant during Covid-19 pandemic. The results imply that promoting financial literacy may result in less cash usage at points of sale accompanied by the currency in circulation growth, due to the overwhelming effect of increased non-transactional demand following a positive change in financial literacy level.

Suggested Citation

  • Mustafa Recep Bilici & Saygin Cevik, 2022. "Financial Literacy and Cash Holdings in Turkey," Working Papers 2202, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:2202
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/en/tcmb+en/main+menu/publications/research/working+paperss/2022/22-02
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    Keywords

    Financial literacy; Money demand; Cash demand;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy

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