The long-term effects of E-banking on the volume of currency held by the public

This study aims to evaluate the effect of electronic banking on holding currency by people, because the fast development of electronic banking is currently unavoidable subject in Iran. In e-banking, electronic transactions have been substituted for physical money transactions. This study explores whether electronic banking practice in Iran has reduced the amount of holding currency. Decreasing currency holdings increase the volume of bank deposits and the authority of regulatory and monetary policy-making by central bank and reduce the risks of money laundering. This study uses quarterly data from 2005 to 2014, Johansen-Juselius co-integration approach and Vector Error Correction Model (VECM) to analyze the long-term effects of e-banking development on the volume of currency in circulation. The results show that increasing volume of Point-of-sale (POS) devices in the long term has a significant and negative impact on the volume of currency while increasing use of Automatic Teller Machines (ATMs) has a significant and positive impact on holding currency.