Template-Type: ReDIF-Article 1.0
Author-Name: Tamás Ilyés
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: ilyest@mnb.hu
Author-Name: Lóránt Varga
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: vargalor@mnb.hu

Title: Macroeconomic effects of the increase
of electronic retail payments – A general
equilibrium approach using Hungarian data

Abstract: In our study, we assess the possible impacts on the performance of the Hungarian
economy if various proportions of retail cash payments were substituted with debit
card payments. We conducted our analysis in the framework of a general equilibrium
model, which also takes into account the costs of payment transactions in a detailed
manner. The results indicate that substitution of cash payments with debit card
transactions has a favourable impact on the performance and competitiveness of
the economy, increases real income, real consumption, the level of GDP and the
tax income of the state as well. The favourable effects increase exponentially with
the degree of substitution, but are also manifest even in the case of a low level
substitution, which is attainable in just a few years. According to our calculations,
the favourable macroeconomic impact derives, to a smaller extent, from the transfer
of resources released in the field of payment services to other sectors. A more
significant impact derives from the fact that, on the one hand, substitution also
improves the efficiency of resources already available in the real economy, and,
on the other hand, the characteristics of the pricing of debit card services typically
causes a smaller deadweight loss than the level we could register concerning the
more complex cross-pricing of cash payment services. Based on our findings, on
the whole we can formulate the conclusion that by supporting and accelerating
the constant efficiency improvement of retail payments, economic policy is able to
improve the performance and competitiveness of the entire economy, both directly
and indirectly.

Classification-JEL: C68, E27, E42
Keywords: retail payments, methods of payment, general equilibrium theory, CGE
modelling, social costs

Journal: Financial and Economic Review  
Pages: 129–152
Volume: 15
Issue: 2
Year: 2016
File-URL: http://english.hitelintezetiszemle.hu/letoltes/tamas-ilyes-lorant-varga-en.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:15:y:2016:i:2:p:129-152