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Physical vs Digital Currency: What's the Difference, Why it Matters

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Listed:
  • Nicola Amendola
  • Luis Araujo
  • Leo Ferraris

Abstract

This paper compares digital and physical currency, focusing on a single intrinsic difference: digital, unlike physical, currency allows the authorities to trace the monetary flows in and out of the accounts. We show that this technological advance in record-keeping can be used to reward active balances relative to idle balances. This helps achieve efficiency in a wide range of circumstances.

Suggested Citation

  • Nicola Amendola & Luis Araujo & Leo Ferraris, 2024. "Physical vs Digital Currency: What's the Difference, Why it Matters," Working Papers 537, University of Milano-Bicocca, Department of Economics.
    • Handle: RePEc:mib:wpaper:537
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    File URL: http://repec.dems.unimib.it/repec/pdf/mibwpaper537.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Cash; Digital Currency; Optimal Monetary Policy;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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