Effects of Credit and Debit Cards on the Currency Demand

Applied Economics, Forthcoming

21 Pages Posted: 22 Jun 2007 Last revised: 17 Nov 2022

See all articles by Mustafa Ege Yazgan

Mustafa Ege Yazgan

Istanbul Bilgi University

Hakan Yilmazkuday

Florida International University (FIU) - Department of Economics

Date Written: January 1, 2009

Abstract

We analyze the effects of credit and debit cards on the currency in circulation by using GMM estimation. Instead of using the data obtained by surveys, we use monthly data obtained by an interbank institution that keeps the statistics of all credit and debit cards usage of a small open economy, Turkey, for the period over 2002M1-2006M10. As expected from the theory, we find that an increase in the usage of credit and debit cards leads to a decrease in the currency demand. Moreover, the usage of the debit cards has a bigger effect on the money demand, compared to the usage of the credit cards. We also find that the effect of credit cards is mostly through purchases and the effect of debit cards is mostly through withdrawals.

Keywords: Credit cards, Debit cards, Currency demand, GMM estimation, Turkey

JEL Classification: E41

Suggested Citation

Yazgan, Mustafa Ege and Yilmazkuday, Hakan, Effects of Credit and Debit Cards on the Currency Demand (January 1, 2009). Applied Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=995551

Mustafa Ege Yazgan

Istanbul Bilgi University ( email )

Eski Silahtarağa Elektrik Santralı
Silahtarağa Mah. Kazım Karabekir Cad. No: 1 Eyüp
Istanbul, 34060
Turkey

Hakan Yilmazkuday (Contact Author)

Florida International University (FIU) - Department of Economics ( email )

11200 SW 8th Street
Miami, FL 33199
United States

HOME PAGE: http://faculty.fiu.edu/~hyilmazk/

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