Cash and non-cash payments in a long run perspective, Spain 1989-2014

Abstract

[Abstract]: This work investigates the relationships between the retail payment system, monetary aggregates and economic activity in Spain. This approach is taken from a new perspective: that of the transformations that have been favored by ICT in the payment system. The methodology used is based on cointegration analysis and the estimation of error correction models. Likewise, an indicator of cashless transactions is proposed in order to illustrate whether a particular society can be classified as “cashless”. We use the Johansen procedure to unveil long-run relationships that are integrated in the real sector, the monetary system and the value of cashless transactions. We prove the relevant (and direct) impact of changes in the monetary system and national income on the value of cashless transactions. Using error correction models, we observe that the most important short-run relationships in terms of the value of cashless transactions are those related to the real sector of the economy, while with regard to monetary variables, the relevance is focused on the more liquid sectors. The empirical results evidence the intensive progress of the cashless society in Spain, where the banking sector, the regulatory changes and ICT development have played a key role.