Retail Payments and the Real Economy

47 Pages Posted: 12 Aug 2013

See all articles by Iftekhar Hasan

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Tania De Renzis

European Securities and Markets Authority

Heiko Schmiedel

European Central Bank - Securities Settlement Systems Policy Division

Date Written: August 2013

Abstract

This paper examines the fundamental relationship between retail payments and the real economy. Using data from across 27 European markets over the period 1995-2009, the results confirm that migration to efficient electronic retail payments stimulates the overall economy, consumption and trade. Among different payment instruments, this relationship is strongest for card payments, followed by credit transfers. 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 harmonize 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 the real economy 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 harmonized electronic payment instruments.

Keywords: retail payments, real economy, financial development

JEL Classification: G20, G21

Suggested Citation

Hasan, Iftekhar and De Renzis, Tania and Schmiedel, Heiko, Retail Payments and the Real Economy (August 2013). ECB Working Paper No. 1572, Available at SSRN: https://ssrn.com/abstract=2302527 or http://dx.doi.org/10.2139/ssrn.2302527

Iftekhar Hasan (Contact Author)

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Tania De Renzis

European Securities and Markets Authority ( email )

103 Rue de Grenelle
Paris, 75007
France

Heiko Schmiedel

European Central Bank - Securities Settlement Systems Policy Division ( email )

Directorate General Payment Systems
Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49-69 13 44 70 59 (Phone)
+49-69 13 44 60 00 (Fax)

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