Why Do People Save in Cash? Distrust, Memories of Banking Crises, Weak Institutions and Dollarization

Arbeitspapier

The paper analyzes why households in transition economies prefer to hold sizeable shares of their assets in cash at home rather than in banks. Using survey data from ten Central, Eastern and Southeastern European countries, I document the relevance of this behavior and show that cash preferences cannot be fully explained by whether people are banked or unbanked. The analysis reveals that a lack of trust in banks, memories of past banking crises and weak tax enforcement are important factors. Moreover, cash preferences are stronger in dollarized economies where a "safe" foreign currency serves as a store of value.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 178

Classification and Topics

• Classification: Wirtschaft ; Demand for Money ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance ; Portfolio Choice; Investment Decisions ; Consumer Economics: Empirical Analysis ; Socialist Institutions and Their Transitions: Financial Economics
• Subject: Cash demand ; cash hoarding ; household finance ; trust in banks ; social capital ; dollarization ; Geld ; Sparen ; Privater Haushalt ; Währungssubstitution ; Bankenkrise ; Lernprozess ; Vertrauen ; Wirtschaftsordnung ; Transformationsstaaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Stix, Helmut
• Event: Veröffentlichung
• (who): Oesterreichische Nationalbank (OeNB)
• (where): Vienna
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/264770
• Last update: 10.03.2025, 11:43 AM CET