Cash Demand in Ukraine: a Regional Perspective

Cash demand was observed to be growing in the advanced countries after the Global Financial Crisis. Moreover, a substantial increase in cash usage was observed both in emerging and advanced economies during the COVID-19 pandemic. In this work we study the structural determinants of the cash demand in Ukraine, exploring the possible regional differences. Results indicate, that interest rate is negatively associated with cash usage. At the same time, there are several factors positively related to the cash demand. First of all, regions with higher-than-average employment in the construction sector are likely to demand cash more. Secondly, the impact of COVID-19 (measured by the dummy variable) was found positive and statistically significant. This confirms the findings from the data of a substantial increase in the cash demand during the pandemic. Thirdly, the impact of uncertainty was found to be positive as well. However, the result is sensitive to the specification and type of robust standard errors employed.