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Dirty money: Does the risk of infectious disease lower demand for cash?

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  • Serhan Cevik

Abstract

The COVID‐19 pandemic is a global crisis like no other in modern times, and there is a growing apprehension about handling potentially contaminated cash. This paper is the first empirical attempt in the literature to investigate whether the risk of infectious diseases affects demand for physical cash. Since the intensity of cash use may influence the spread of infectious diseases, this paper utilizes two‐stage least squares methodology with instrumental variable to address omitted variable bias and account for potential endogeneity. The empirical analysis indicates that the spread of infectious diseases lowers demand for physical cash, after controlling for macroeconomic, financial, and technological factors. This effect, withstanding several robustness checks, is economically and statistically significant. While the transactional constraints imposed by the coronavirus pandemic could become a catalyst for the use of digital technologies around the world, electronic payment methods may not be universally available in every country owing to financial and technological bottlenecks.

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  • Serhan Cevik, 2020. "Dirty money: Does the risk of infectious disease lower demand for cash?," International Finance, Wiley Blackwell, vol. 23(3), pages 460-471, December.
    • Handle: RePEc:bla:intfin:v:23:y:2020:i:3:p:460-471
    DOI: 10.1111/infi.12383
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    Cited by:

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    2. Claire Greene & Ellen A. Merry & Joanna Stavins, 2021. "Has COVID Changed Consumer Payment Behavior?," Working Papers 21-12, Federal Reserve Bank of Boston.
    3. Rösl, Gerhard & Seitz, Franz, 2021. "Cash and crises: No surprises by the virus," IMFS Working Paper Series 150, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    4. Toshitaka Sekine & Toshiaki Shoji & Tsutomu Watanabe, 2022. "Going Cashless: Government’s Point Reward Program vs. COVID-19," CARF F-Series CARF-F-538, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    5. Kotkowski, Radoslaw, 2023. "National culture and the demand for physical money during the first year of the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 51(C).
    6. Toshitaka Sekine & Toshiaki Shoji & Tsutomu Watanabe, 2022. "Going Cashless: Government’s Point Reward Program vs. COVID-19," Working Papers on Central Bank Communication 040, University of Tokyo, Graduate School of Economics.
    7. Marcin Suder & Tomasz Wójtowicz & Rafał Kusa & Henryk Gurgul, 2023. "Challenges for ATM management in times of market variability caused by the COVID-19 pandemic crisi," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 31(2), pages 445-465, June.
    8. Toshitaka Sekine & Toshiaki Shoji & Tsutomu Watanabe, 2021. "Going Cashless: Evidence from Japan’s Point Reward Program," CARF F-Series CARF-F-525, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    9. Toshitaka Sekine & Toshiaki Shoji & Tsutomu Watanabe, 2021. "Going Cashless: Evidence from Japan’s Point Reward Program," Working Papers on Central Bank Communication 036, University of Tokyo, Graduate School of Economics.
    10. Miloš Milosavljević & Milan Okanović & Slavica Cicvarić Kostić & Marija Jovanović & Milenko Radonić, 2023. "COVID-19 and Behavioral Factors of e-Payment Use: Evidence from Serbia," Sustainability, MDPI, vol. 15(4), pages 1-13, February.
    11. Porter, G. & Murphy, E. & Adamu, F. & Dayil, P.B. & De Lannoy, A. & Han, S. & Mansour, H. & Dungey, C. & Ahmad, H. & Maskiti, B. & S, Clark & Van der Weidje, K., 2021. "Women’s mobility and transport in the peripheries of three African cities: Reflecting on early impacts of COVID-19," Transport Policy, Elsevier, vol. 110(C), pages 181-190.

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