Research Discussion Papers, Bank of Finland
No 19/2012:
Retail payments and economic growth
Iftekhar Hasan ()
, Tania De Renzis ()
and Heiko Schmiedel ()
Abstract: This paper examines the fundamental relationship between
retail payments and overall economic growth. Using data from across 27
European markets over the period 1995–2009, the results confirm that
migration to efficient electronic retail payments stimulates overall
economic growth, consumption and trade. Among different payment
instruments, this relationship is strongest for card payments, followed by
credit transfers and direct debits. Cheque payments are found to have a
relatively low macroeconomic impact. Retail payment transaction technology
itself is also associated positively to real economic aggregates. We also
show that initiatives to integrate and harmonise retail payment markets
foster trade and consumption and thereby have a beneficial effect for whole
economy. Additionally, the findings reveal that the impact of retail
payments on economic growth is more pronounced in euro area countries. Our
findings are robust to different regression specifications. The study
supports the adoption of policies promoting a swift migration to efficient
and harmonised electronic payment instruments.
Keywords: retail payments; economic growth; financial development; (follow links to similar papers)
JEL-Codes: G20; G21; (follow links to similar papers)
37 pages, April 20, 2012
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