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Towards a cashless economy: Economic and socio-political implications

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  • Cohen, Nissim
  • Rubinchik, Anna
  • Shami, Labib

Abstract

We construct a simple general equilibrium model to demonstrate how eliminating cash can lead to a misallocation of resources in a naturally segmented economy with observed (official) and non-observed (informal) sectors. The source of inefficiency mirrors the standard arguments explaining why money is essential: a promise backed by a good produced in one sector can not be used in another and so absence of a reliable fiat money reduces the gains from trade. We also point to several additional unintended consequences of cash elimination.

Suggested Citation

  • Cohen, Nissim & Rubinchik, Anna & Shami, Labib, 2020. "Towards a cashless economy: Economic and socio-political implications," European Journal of Political Economy, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:poleco:v:61:y:2020:i:c:s0176268019301843
    DOI: 10.1016/j.ejpoleco.2019.101820
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    Cited by:

    1. Jeremy Srouji, 2020. "Digital Payments, the Cashless Economy, and Financial Inclusion in the United Arab Emirates: Why Is Everyone Still Transacting in Cash?," JRFM, MDPI, vol. 13(11), pages 1-10, October.

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    More about this item

    Keywords

    Shadow economy; Cash; Money; Segmented markets;
    All these keywords.

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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