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Cash and Negative Interest Rates

Author

Listed:
  • Berentsen, Aleksander
  • Schär, Fabian

Abstract

Cash is accused of three sins: First, cash is inefficient and costly to use, and society would be better off without it. Second, it promotes crime, and facilitates money laundering and tax evasion. Third, it makes negative nominal interest rates infeasible. In certain situations, this may hinder central banks from implementing optimal monetary policies. In this article, we argue that all three accusations are fallacies; they are based on faulty reasoning. There is absolutely no need to limit the use of cash. On the contrary, societies should facilitate its use.

Suggested Citation

  • Berentsen, Aleksander & Schär, Fabian, 2016. "Cash and Negative Interest Rates," MPRA Paper 70832, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:70832
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    More about this item

    Keywords

    Cash; Negative Interest Rates; Lower Bound;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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