The Demand for Currency Versus Debitable Accounts: A Reconsideration

31 Pages Posted: 20 May 2007

See all articles by David Bounie

David Bounie

Télécom Paris

Abel Francois

Strasbourg University, LARGE; University of Strasbourg - EM Strasbourg Business School; Telecom ParisTech

Nicolas Houy

University of Cergy-Pontoise - THEMA

Date Written: May 2007

Abstract

Payment choice models based on transaction sizes (TS models) induce strong predictions about the use of payment instruments. Especially, all equal-sized transactions should be paid with the same payment instrument. Then, for each individual, one should observe strict domains of transaction for every payment instruments. Using micro-level payment data from a representative sample of the French population, we show that TS models are bad at replicating individual and aggregate payment patterns. First, we show that the predictions of TS models are not empirically validated on an individual level. Second, we develop and test three models to explain the observed aggregate payment patterns. The first two models are aggregate versions of TS models and the third one is an alternative model based on a payment decision rule depending on cash holding (CH model). We find that the third model gives predictions between 2 and 6 times more precise than the first two models with notably less demanding information on individuals.

Keywords: Demand for money, Payment Instruments, Forecasting and Simulations

JEL Classification: E41, E17, G2

Suggested Citation

Bounie, David and Francois, Abel and Houy, Nicolas, The Demand for Currency Versus Debitable Accounts: A Reconsideration (May 2007). Available at SSRN: https://ssrn.com/abstract=987375 or http://dx.doi.org/10.2139/ssrn.987375

David Bounie

Télécom Paris ( email )

19 Place Marguerite Perey
Palaiseau, 91120
France

Abel Francois

Strasbourg University, LARGE ( email )

47 avenue de la foret Noire
Strasbourg, 67000
France

HOME PAGE: http://abelfrancois.wordpress.com/information/

University of Strasbourg - EM Strasbourg Business School ( email )

PEGE
61 avenue de la Forêt Noire
Strasbourg, 67000
France

HOME PAGE: http://abelfrancois.wordpress.com/information/

Telecom ParisTech

46, rue Barrault
Paris Cedex 13, F-75634
France

Nicolas Houy (Contact Author)

University of Cergy-Pontoise - THEMA ( email )

33 boulevard du port
F-95011 Cergy-Pontoise Cedex, 95011
France

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