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Falling Use of Cash and Demand for Retail Central Bank Digital Currency

Author

Listed:
  • Mr. Tanai Khiaonarong
  • David Humphrey

Abstract

Cash use in most countries is falling slowly. On the margin, younger adults favor cash substitutes over cash. For older adults it is the reverse. Revealed preference tied to a changing population age structure seems to be the main influence on the demand for cash and why it is falling. Cash use may continue to fall, and card use (the main cash substitute) may fall by more, if CBDC is issued. The extent of this reduction depends on the demand for retail CBDC and the incentives (primarily transaction fees) that can play a determining role in CBDC adoption and use.

Suggested Citation

  • Mr. Tanai Khiaonarong & David Humphrey, 2022. "Falling Use of Cash and Demand for Retail Central Bank Digital Currency," IMF Working Papers 2022/027, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2022/027
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    Cited by:

    1. Ozili, Peterson K, 2023. "Redesigning the eNaira central bank digital currency (CBDC) for payments and macroeconomic effectiveness," MPRA Paper 118807, University Library of Munich, Germany.
    2. 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.

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