Heng Chen is a Principal Researcher in the Currency Department at the Bank of Canada. His primary research interests center on the structural identification and estimation of the causal effects of the method of payments on the cash usage. Specific topics include distributional estimations using the longitudinal CFM data. Heng Chen received his PhD in economics from Vanderbilt University.
Cash is the preferred method of payment for small value transactions generally less than $25. We provide insight to this finding with a new theoretical model that characterizes and compares consumers’ costs of paying with cash to paying with cards for each transaction.
Calibrated weights are created to (a) reduce the nonresponse bias; (b) reduce the coverage error; and (c) make the weighted estimates from the sample consistent with the target population in terms of certain key variables.
Using data from our 2014 cost-of-payments survey, we calculate resource costs for cash, debit cards and credit cards. For each payment method, we examine the total cost incurred by consumers, retailers, financial institutions and infrastructures, the Royal Canadian Mint and the Bank of Canada.
Sampling units for the 2013 Methods-of-Payment Survey were selected through an approximate stratified random sampling design. To compensate for non-response and non-coverage, the observations are weighted through a raking procedure.