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Cash use across countries and the demand for central bank digital currency

Author

Listed:
  • Khiaonarong, Tanai

    (Senior Financial Sector Expert, International Monetary Fund, USA)

  • Humphrey, David

Abstract

Within any country, the demand for central bank digital currency (CBDC) will be influenced by trends in the level of cash use. While having access to digital currency is more convenient than having to travel to an automated teller machine, this only makes digital currency as convenient as a bank debit card — not better. Demand for digital currency will thus be weak in countries where the adoption of cash substitutes (eg cards, electronic money, mobile phone payments) has suppressed demand for cash. By contrast, where cash use is high due to a lack of substitutes, demand for digital currency should be stronger. Building on the observation that demand for CBDC is tied to the current level of cash use, this paper uses four measures to assess trends in the demand for cash in 11 countries. A tentative forecast of cash use is also made. After showing that declining cash use is largely associated with demographic change, the study ties the level of cash use to the likely demand for CBDC in different countries. In this process, it is suggested that one measure of cash use is more useful than the others.

Suggested Citation

  • Khiaonarong, Tanai & Humphrey, David, 2019. "Cash use across countries and the demand for central bank digital currency," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 13(1), pages 32-46, March.
    • Handle: RePEc:aza:jpss00:y:2019:v:13:i:1:p:32-46
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    Citations

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    Cited by:

    1. Nwamaka A. Anaza & Delancy H. S. Bennett & Yana Andonova & Emeka Anaza, 2022. "DPS 2.0: on the road to a cashless society," Marketing Letters, Springer, vol. 33(4), pages 693-704, December.
    2. Peterson K. Ozili, 2022. "Circular Economy and Central Bank Digital Currency," Circular Economy and Sustainability,, Springer.
    3. Jakšić Milena & Todorović Violeta & Matić Jelena, 2022. "The Influence of Digital Currency on the Banking Sector in Europe," Economic Themes, Sciendo, vol. 60(4), pages 481-494, December.
    4. Shalva Mkhatrishvili & Wim Boonstra, 2022. "What we know on Central Bank Digital Currencies (so far)," NBG Working Papers 01/2022, National Bank of Georgia.
    5. Hoang, Yen Hai & Ngo, Vu Minh & Bich Vu, Ngoc, 2023. "Central bank digital currency: A systematic literature review using text mining approach," Research in International Business and Finance, Elsevier, vol. 64(C).
    6. Prescott, Brian C. & Shy, Oz, 2023. "Cash payments and the penny policy debate," Journal of Economic Behavior & Organization, Elsevier, vol. 208(C), pages 80-94.
    7. Xin, Baogui & Jiang, Kai, 2023. "Central bank digital currency and the effectiveness of negative interest rate policy: A DSGE analysis," Research in International Business and Finance, Elsevier, vol. 64(C).
    8. Li, Fangmin & Yang, Tianle & Du, Min & Huang, Miao, 2023. "The development fit index of digital currency electronic payment between China and the one belt one road countries," Research in International Business and Finance, Elsevier, vol. 64(C).

    More about this item

    Keywords

    cash use; cash forecasting; central bank digital currency;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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