There was an interesting study done by few economists. They checked the denomination effect. Or the effect the coins have on the spending habits of the consumers.
The results of the study are quite remarkable. People tend to spend the coins faster than the bills or notes.
The initial study was done in the US.Just to make sure that the findings are not influenced by the country they live in, the economists went to China and found the same kind of results.
I wish they had come to India. The results would have been really different. One cannot buy anything meaningful (A fevistick?) with the available coins. The maximum denomination of a coin is 5 rupees. And the economists would have to give a whole lot of 5 rupee coins to gage the consumer spending.
But, the results of this survey are not to be ignored. If the countries can issue more coins in place of the bills the world economy might be revived a little sooner as this would be a direct effect on the spending habits. More so than the tax cuts and the stimulus cheques.
We’ve done some studies with four quarters and a dollar, and we found that people were much less likely to spend the $1 note that they were given than the four quarters they were given (NPR)
Given that Obama is more open, bi-partisan and all that – he might pay heed to this advice and slow down on his tax ‘reforms’. (Read : Boy George is at it again)
Coming to India, there was a lot of news about 10 rupee coins being circulated. I haven’t seen one. But, when I do, that will be the first thing I will spend. Heck, I will even spend a 20 rupee coin if is introduced. So, Yes I agree completely with the study.
Government of India should introduce those 10 rupee coins a little faster and may be this fiscal. What do you think?
PS : Apparently the 10 rupee coins are already introduced but have a defect. They can break into 2 pieces. What would that be? 20 rupees? That would revive the economy even faster. May be Obama needs to get that breaking formulae from Rao or Singh.