Advanced Search
MyIDEAS: Login to save this article or follow this journal

The challenges facing currency usage: will the traditional transaction medium be able to resist competition from the new technologies?

Contents:

Author Info

  • Mathias Drehmann
  • Charles Goodhart
  • Malte Krueger

Abstract

The euro's introduction highlights several shortcomings of cash and coins, and some advantages of paying with plastic, but is hard currency an endangered species, threatened by technologically more advanced means of payments, electronic transfers, e-money and the like? If the last twenty years are any guide, the answer is no. We find that modern payment technologies have little impact on currency usage. To understand this lack of effect, we distinguish between demands for large- and small-denomination banknotes. Competition from existing electronic retail payments' products focuses mostly on small to medium-sized purchases where small bills (less than the �50) are most common. By contrast, there are few signs, nor much likelihood, of past or current electronic products displacing holdings of large bills without government intervention. Large bills, which account for over half the stock of outstanding currency in many OECD nations, are mainly held for hoarding and bad behaviour motives ranging from hard crime to paying the plumber under the table; for such purposes the anonymity of cash is, and is likely to remain, superior. As concerns policy implications, we note that, although issuing large denomination bills facilitates 'bad behaviour', withdrawing big bills is unlikely for political reasons. Governments could try to induce e-money usage as a means of discouraging bad behaviour, but we argue that any attempt to force a complete shift to electronic transfer, and to try to ban, or to prevent, the domestic use of cash would be appallingly illiberal. Copyright (c) CEPR, CES, MSH, 2002.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/1468-0327.00087
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by CEPR & CES & MSH in its journal Economic Policy.

Volume (Year): 17 (2002)
Issue (Month): 34 (04)
Pages: 193-228

as in new window
Handle: RePEc:bla:ecpoli:v:17:y:2002:i:34:p:193-228

Contact details of provider:
Postal: 3rd Floor, 77 Bastwick Street, London EC1V 3PZ
Phone: +44 (0)20 7183 8801
Fax: +44 (0)20 7183 8820
Email:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0266-4658
More information through EDIRC

Postal: Schackstr. 4, 80539 Munich
Phone: +49 (89) 2180-2748
Fax: +49 (89) 39 73 03
Email:
Web page: http://www.cesifo-group.de/portal/page/portal/ifoHome/f-about/f2aboutces
More information through EDIRC

Postal: 48 boulevard Jourdan - 75014 Paris
Phone: 01 43 13 63 00
Fax: 01 43 13 63 10
Email:
Web page: http://www.pse.ens.fr/
More information through EDIRC

Order Information:
Web: http://www.blackwellpublishing.com/subs.asp?ref=0266-4658

Related research

Keywords:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bla:ecpoli:v:17:y:2002:i:34:p:193-228. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.