Impact of Debit and Credit Cards on Currency in Circulation in Mauritius

Abstract

This chapter analyses the impacts of credit and debit cards on currency in circulation for Mauritius for the period 1999–2008. The analysis is undertaken in three versions, an aggregate version which combines notes and coins together to then move towards specificity of currency, i.e. notes being assessed separately from coins. Findings show that the number of both credit and debit cards exert no influence on the amount of currency in circulation. However, the use of a second model with a different proxy shows that the use of debit cards behaves as a complement to, rather than a substitute for, notes in circulation. Compatible with prior empirical evidence in other countries, GDP is found to unleash the strongest economic impact on currency in circulation, independent of the model employed. Overall, strong evidence is found as to Mauritians using their debit cards to withdraw notes instead of effecting direct payments so that debit cards act as a complement in lieu of a substitute to notes.