1- Monetary & Banking Research Institute , rkhoshnoud@yahoo.com
2- Central Bank of Iran
2- Central Bank of Iran
Abstract: (394 Views)
Credit card as one of the payment instruments has faced challenges in the banking sector of Iran. Hence in the last decade, the central bank has applied effective measures to enhance the relevant operating platform by setting the required regulations and updating the relevant circulars and directives, which has led to an increase in the demand and use of credit card in the banking sector. Therefore significant evolutions in the money velocity pursuant to the increasing acceptance of credit card as a means of payment is expected, which has the capacity of affecting inflation and distorting inflation targeting achievements of the Central Bank. To evaluate this issue based on the quarterly data of 2010-2022, the factors affecting the money velocity - in terms of the monetary base and the limited definition of money - are examined via a vector autoregressive model. In this model, in addition to the volume of credit card based transactions, the interbank interest rate is used as an indirect monetary policy instrument, along with the exchange rate, inflation rate, and the total volume of transactions based on debit cards and accounts. According to the results, the credit card boom in the sample period could not affect the money velocity and the exchange rate had an effective role in the behavior of money velocity.
References
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24. Mill, J. S. (1848). Principles of Political Economy with Some of Their Applications to Social Philosophy. Vol. 1. C.C. Little & J. Brown.
25. Otoakhia, E. I. (2023). Contemporary analysis of velocity of money and payment systems: A descriptive and empirical approach. CBN Bullion. 49(3), 53-66.
26. Putra, H.S., Huljannah, M., Anis, A., & Azhar, Z. (2021). Debit and credit cards: money velocity risks. Jurnal Ekonomi & Studi Pembangunan, 22(2), 228-243. [DOI:10.18196/jesp.v22i2.11208]
27. Roy, J., Rochaida, E., Suharto, R. B., & Rizkiawan, R. (2021). Digital and electronic transactions against velocity of money [Special issue]. Corporate Governance and Organizational Behavior Review, 5(2), 145-155. [DOI:10.22495/cgobrv5i2sip3]
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