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Cash demand in times of crisis

Author

Listed:
  • Rösl, Gerhard

    (Professor of Economics, Technical University of Applied Sciences, Germany)

  • Seitz, Franz

    (Professor of Economics, Technical University of Applied Sciences, Germany)

Abstract

This paper focuses on the role of specific types of crisis (technological crisis, financial market crisis, natural disaster) and their effects on the demand for cash in an international context. As evidence from the last 30 years shows, demand for cash increases during periods of crisis, regardless of the nature of the crisis. The nature of the crisis does, however, determine whether small or large banknote denominations are affected more. This study finds that times of payment uncertainties are associated with increased demand for small denominations, probably reflecting an elevated demand for transaction balances. By contrast, in times of financial crisis or general economic uncertainty, the increased demand for cash is largely the result of consumers taking precautionary actions and building up non-transaction balances; for this reason, there is greater demand for large banknote denominations. This study finds that cash continues to play an important role in crisis management. Whether this function can also be fulfilled by a future central bank digital currency, however, remains to be seen.

Suggested Citation

  • Rösl, Gerhard & Seitz, Franz, 2022. "Cash demand in times of crisis," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 16(2), pages 107-119, March.
    • Handle: RePEc:aza:jpss00:y:2022:v:16:i:2:p:107-119
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    Cited by:

    1. Zamora-Pérez, Alejandro, 2026. "Who owns crypto in the euro area? Drivers of crypto adoption, payment use, and its interaction with fiat cash," Working Paper Series 3215, European Central Bank.
    2. Rösl, Gerhard & Seitz, Franz, 2024. "Uncertainty, politics, and crises: The case for cash," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 5(3).
    3. Seitz, Franz & Rösl, Gerhard, 2022. "On the Stabilizing Role of Cash for Societies," MPRA Paper 113784, University Library of Munich, Germany.
    4. Pitters, Julia, 2023. "Psychologische Aspekte von Bargeld in Not- und Krisenzeiten," IU Discussion Papers - Social Sciences 5 (September 2023), IU International University of Applied Sciences.
    5. Batiz-Lazo, Bernardo & Maixe-Altes, J Carles & Peon, David, 2023. "Behavioral drivers of cashless payments in Africa," MPRA Paper 117984, University Library of Munich, Germany.

    More about this item

    Keywords

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    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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