Heng Chen is a Research Advisor in the Currency Department at the Bank of Canada. His primary research interests center on understanding cash demand and usage through surveys and casual inference. Heng Chen received his PhD in economics from Vanderbilt University.
Staff discussion papers
Identifying Financially Remote First Nations ReservesChen et al. (2021) show that almost one-third of First Nations band offices in Canada are within 1 kilometre (km) of an automated banking machine (ABM) or financial institution (FI) branch and more than half are within 5 km.
Cash and COVID-19: What happened in 2021Using data from the Bank Note Distribution System and consumer surveys, we find that bank notes in circulation remained high through 2021. Canadians continued to rely on electronic methods of payment, but a significant share also continued using cash for payments.
Cash and COVID-19: The impact of the second wave in CanadaThe COVID-19 pandemic significantly increased the demand for cash. Cash in circulation increased sharply from March through December 2020, particularly in the early months of this period. Although use of electronic methods of payment also increased significantly, cash use for payments remains high for low-value transactions and among certain demographic groups.
An Exploration of First Nations Reserves and Access to CashAdequate cash distribution is one the Bank of Canada’s core interests. Canadians’ ability to access cash influences the Bank’s thinking on issuing a central bank digital currency. We provide a perspective on these issues by exploring access of First Nations reserves to cash.
Cash and COVID-19: The Effects of Lifting Containment Measures on Cash Demand and UseUsing Bank Note Distribution System data on the demand for cash up to September 2020, we find that demand was strong. This is true even though cash use for payments declined early in the pandemic. When mobility restrictions and lockdown measures were eased, cash use for payments increased sharply but remained less popular than electronic methods of payment.
Cash and COVID-19: The impact of the pandemic on demand for and use of cashConsumer spending declined significantly during the recent COVID-19 pandemic. This negative shock likely reduced spending across all methods of payment (cash, debit, credit, etc.). The mix of payment methods consumers use could also be affected. We study how the pandemic has influenced the demand for and use of cash. We also offer insights into the use of other payment methods, such as debit and credit cards.
The Costs of Point-of-Sale Payments in CanadaUsing 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.
Staff working papers
Consumer Cash Withdrawal Behaviour: Branch Networks and Online Financial InnovationThe physical network of bank branches is important in how consumers manage their cash holdings. This paper estimates how consumer withdrawal behaviour responds to the distance they must travel to their branch.
A Spatial Model of Bank Branches in CanadaUsing data on bank branch locations across Canada from 2008 to 2018, we explore an interesting aspect of bank branch competition—geographic concentration. We find that bank branch density does not correlate with geographic and market concentration; however, we do find strong correlation with postal-code demographics.
Cash Versus Card: Payment Discontinuities and the Burden of Holding CoinsCash 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.
The Mode is the Message: Using Predata as Exclusion Restrictions to Evaluate Survey DesignChanges in survey mode (e.g., online, offline) may influence the values of survey responses, and may be particularly problematic when comparing repeated cross-sectional surveys.
Retail Payment Innovations and Cash Usage: Accounting for Attrition Using Refreshment SamplesWe exploit the panel dimension of the Canadian Financial Monitor (CFM) data to estimate the impact of retail payment innovations on cash usage. We estimate a semiparametric panel data model that accounts for unobserved heterogeneity and allows for general forms of non-random attrition.
Sheep in Wolf’s Clothing: Using the Least Squares Criterion for Quantile EstimationEstimation of the quantile model, especially with a large data set, can be computationally burdensome. This paper proposes using the Gaussian approximation, also known as quantile coupling, to estimate a quantile model.
2017 Methods-of-Payment Survey: Sample Calibration and Variance EstimationThis technical report describes sampling, weighting and variance estimation for the Bank of Canada’s 2017 Methods-of-Payment Survey. Under quota sampling, a raking ratio method is implemented to generate weights with both post-stratification and nonparametric nonresponse weight adjustments.
The Bank of Canada 2015 Retailer Survey on the Cost of Payment Methods: Calibration for Single-Location RetailersCalibrated 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.
Variance Estimation for Survey-Weighted Data Using Bootstrap Resampling Methods: 2013 Methods-of-Payment Survey QuestionnaireSampling 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.
- Multi-dimensional Latent Group Structure with Heterogeneous Distributions (with Wendun Wang and Xuan Leng), Accepted, Journal of Econometrics.
- Quantile Treatment Effects in the Regression Kink Design (with Harold D. Chiang and Yuya Sasaki), Econometric Theory, 2020.
- A Spatial Panel Model of Bank Branches in Canada (with Matthew Strathearn), Advances in Econometrics (Volume 42): The Econometrics of Networks. Editors: Áureo De Paula (UCL), Elie Tamer (Harvard), and Marcel Voia (Carleton), 2019.
- Identification and Wavelet Estimation of Weighted ATE in a Class of Switching Regime Models (with Yanqin Fan), Journal of Econometrics, 2019.
- The Mode is the Message: Using Paradata to Identify Survey Design Effects (with Geoff Dunbar and Rallye Shen), Advances in Econometrics (Volume 41): Essays in Honor of Cheng Hsiao. Editors: M. Hashem Pesaran (USC), Tong Li (Vanderbilt), and Dek Terrell (LSU), 2019.
- Cash versus Card: Payment Discontinuities and the Burden of Holding Coins (with Kim Huynh and Oz Shy), Journal of Banking and Finance, 2019.
- Variance Estimation for Survey-Weighted Data Using Bootstrap Resampling Methods: 2013 Methods-of-Payment Survey Questionnaire (with Rallye Shen), Advances in Econometrics (Volume 39): The Econometrics of Complex Survey Data: Theory and Applications. Editors: Gautam Tripathi (U Luxembourg), David Jacho-Chavez (Emory U), Kim P. Huynh (Bank of Canada), 2018.
- Measuring Consumer Cash Holdings: Lessons from the 2013 Bank of Canada Methods-of-Payment Survey (with Chris Henry, Kim Huynh, Rallye Shen, Kyle Vincent), Survey Practice, 2016.
- Retail Payment Innovations and Cash Usage: Accounting for Attrition Using Refreshment Samples (with Marie-Helene Felt and Kim Huynh), Journal of Royal Statistical Society: Series A, 2016.
- Inference for the Correlation Coefficient between Potential Outcomes in the Gaussian Switching Regime Model (with Yanqin Fan and Ruixuan Liu), Journal of Econometrics, 2016.
- Sheep in Wolf's Clothing: Using the Least Squares Criterion for Quantile Regression, Economics Letters, 2015.
- A Flexible Parametric Approach for Estimating Switching Regime Models and Treatment Effect Parameters (with Yanqin Fan and Jisong Wu), Journal of Econometrics, 2014.