Publication Type

Journal Article

Version

submittedVersion

Publication Date

8-2024

Abstract

We study how consumer spending responds to digital payments, using the differential switch to digital payments across consumers induced by the sudden 2016 Indian Demonetization for identification. Usage of digital payments rose by 3.38 percentage points and monthly spending increased by 3% for an additional 10 percentage points in prior cash dependence. Spending remained elevated even when cash availability recovered. Robustness analyses show that the spending response is not driven by income shocks, credit supply, price changes, or consumers' moving to the formal market. We provide evidence that digital payments increase consumer spending due to subdued salience.

Keywords

digital payments, financial technology, consumption, India, demonetization

Discipline

Asian Studies | Finance

Research Areas

Applied Microeconomics

Publication

Review of Financial Studies

Volume

37

Issue

8

First Page

2550

Last Page

2585

ISSN

0893-9454

Identifier

10.1093/rfs/hhae005

Publisher

Oxford University Press

Embargo Period

2-10-2022

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1093/rfs/hhae005

Share

COinS