E41 - Demand for Money
-
-
Is a Cashless Society Problematic?
The use of bank notes in Canada for payments has declined consistently for some time, and similar trends are evident in other countries. This has led some observers to predict a cashless society in the future. -
How Long Does It Take You to Pay? A Duration Study of Canadian Retail Transaction Payment Times
Using an exclusive data set of payment times for retail transactions made in Canada, I show that cash is the most time-efficient method of payment (MOP) when compared with payments by debit and credit cards. I model payment efficiency using Cox proportional hazard models, accounting for consumer choice of MOP. -
The Welfare Cost of Inflation Revisited: The Role of Financial Innovation and Household Heterogeneity
We document that, across households, the money consumption ratio increases with age and decreases with consumption, and that there has been a large increase in the money consumption ratio during the recent era of very low interest rates. We construct an overlapping generations (OLG) model of money holdings for transaction purposes subject to age (older households use more money), cohort (younger generations are exposed to better transaction technology), and time effects (nominal interest rates affect money holdings). -
A Look Inside the Box: Combining Aggregate and Marginal Distributions to Identify Joint Distributions
This paper proposes a method for estimating the joint distribution of two or more variables when only their marginal distributions and the distribution of their aggregates are observed. Nonparametric identification is achieved by modelling dependence using a latent common-factor structure. -
Bootstrapping Mean Squared Errors of Robust Small-Area Estimators: Application to the Method-of-Payments Data
This paper proposes a new bootstrap procedure for mean squared errors of robust small-area estimators. We formally prove the asymptotic validity of the proposed bootstrap method and examine its finite sample performance through Monte Carlo simulations. -
Swedish Riksbank Notes and Enskilda Bank Notes: Lessons for Digital Currencies
This paper examines the experience of Sweden with government notes and private bank notes to determine how well the Swedish experience corresponds to that of Canada and the United States. Sweden is important to study because it has had government notes in circulation for more than 350 years, and it had government notes before private bank notes. -
The (Un)Demand for Money in Canada
A novel dataset from the Bank of Canada is used to estimate the deposit functions for banknotes in Canada for three denominations: $1,000, $100 and $50. The broad flavour of the empirical findings is that denominations are different monies, and the structural estimates identify the underlying sources of the non-neutrality. -
A Policy Framework for E-Money: A Report on Bank of Canada Research
We present a policy framework for electronic money and payments. The framework poses a set of positive questions related to the areas of responsibility of central banks: payments systems, monetary policy and financial stability. The questions are posed to four broad forms of e-money: privately or publicly issued, and with centralized or decentralized verification of transactions. This framework is intended to help evaluate the trade-offs that central banks face in the decision to issue new forms of e-money. -
Merchant Acceptance of Cash and Credit Cards at the Point of Sale
Recent data show that the use of credit cards in Canada has been increasing, while the use of cash has been declining. At the same time, only two-thirds of small or medium-sized businesses accept credit cards.