Modelling the Aggregate Payment Decisions in the Economy

21 Pages Posted: 11 Jun 2007

See all articles by David Bounie

David Bounie

Telecom ParisTech

Nicolas Houy

University of Cergy-Pontoise - THEMA

Date Written: June 2007

Abstract

The objective of this paper is to explain the use of cash, payment cards and checks in the economy. In so doing, we propose three models of payment decision and we test how well each of these models replicates the observed aggregate payments decisions. We show that the model based on cash holding performs better than the models based on transaction sizes. This result implies that introducing a third payment instrument crucially modifies the conclusions drawn from previous results given in the literature.

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

JEL Classification: E41, E17, G2

Suggested Citation

Bounie, David and Houy, Nicolas, Modelling the Aggregate Payment Decisions in the Economy (June 2007). Available at SSRN: https://ssrn.com/abstract=992723 or http://dx.doi.org/10.2139/ssrn.992723

David Bounie

Telecom ParisTech ( email )

46 rue Barrault
F-75634 Paris, Cedex 13
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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