Impact of credit cards and debit cards on currency demand and seigniorage
MetadataShow full item record
Predominant usage of cash substitutes such as electronic cards affects the amount of currency that a central bank should keep in circulation. This paper empirically examines the questions that whether the usage of credit and debit cards affect currency demand and seigniorage of Reserve Bank of India by employing Auto Regressive Distributed Lag (ARDL) approach. The study uses macroeconomic data and cards usage data from April 2005 to September 2014. The results find that the use of credit cards is negatively associated with currency demand whereas use of debit cards is positively associated with demand for currency in India. The effect of cards on seigniorage revenue is inconclusive as the coefficients are not statistically significant.
- GIPE Working Papers