Do non-cash payments affect economic growth? Empirical evidence from EU countries

Abstract

Purpose: to assess the impact of traditional forms of non-cash payments on economic growth measured by real GDP per capita in Central and Eastern Europe (CEE) and Western Europe. Design/methodology/approach: the following research hypothesis was formulated: the impact of non-cash payments on economic growth is stronger in Central and Eastern European countries than in Western European countries. The research hypothesis was verified based on empirical analysis of panel data for the years 2005-2018 for the CEE and Western European countries. The following 10 CEECs participated in the research: Slovakia, Bulgaria, Poland, Czech Republic, Hungary, Romania, Lithuania, Latvia, Estonia, Slovenia and eight countries from Western Europe: France, Austria, Belgium, Germany, Netherlands, Luxembourg, Ireland, the United Kingdom. Findings: in CEECs the value of transactions with payment cards had the largest impact on economic growth – an increase in the value of transactions using this payment instrument by one percentage point causes real GDP per capita increase by 0,23 percentage point. On the other hand, an increase in the value of transactions using credit transfers by one percentage point increased real GDP per capita by 0,10 percentage point. the direct debit transactions had a positive impact on the explained variable in the CEE countries – real GDP growth by 0,06 percentage point. Research limitations/implications: The results of the empirical study, likewise in literature, indicated a significant, positive impact of non-cash payments on real GDP per capita growth. The impact on real GDP per capita is only effective for the CEE countries. In Western European countries the level of non-cash transactions reached a certain level of saturation. That was a proved by ineffective iterations performed on various functional forms of the econometric model on panel data. In the group of CEE countries, the value of transactions with payment cards has the greatest impact on real GDP per capita. Originality/value: analysis of current literature on the impact of non-cash payments on economic growth and an empirical analysis. Keywords: household financial management, non-cash turnover, economic growth, real GDP per capita, public management. Category of the paper: Research paper.