The role of card acceptance in the transaction demand for money

  • Huynh K
  • Schmidt-Dengler P
  • Stix H
  • 11


    Mendeley users who have this article in their library.
  • N/A


    Citations of this article.


In developed economies, payment cards (debit and credit) are widely accepted for retail trans-actions and their diffusion among the population is almost ubiquitous. Nevertheless, cash usage still remains widespread. We hypothesize that the lack of card acceptance at the point-of-sale is a key explanation why cash continues to play an important role. We use payment diary survey data from Austrian and Canadian consumers which provide information on cash balances and on card acceptance at individual transactions. We estimate an inventory-theoretic model of cash demand and establish that card acceptance exerts a substantial quantitative im-pact on cash demand. The consumption elasticity of money demand—0.23 and 0.11 for Aus-tria and Canada—is smaller than predicted by the classic Baumol-Tobin inventory model (0.5). Counterfactual experiments reveal that cash demand decreases but will not disappear as accep-tance increases.

Author-supplied keywords

  • counterfactual distributions
  • endogenous switching regressions
  • inventory models of money

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

There are no full text links


  • Kim P. Huynh

  • Philipp Schmidt-Dengler

  • Helmut Stix

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free