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Assessing recent increases in cash demand

Author

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  • Jobst, Clemens
  • Stix, Helmut

Abstract

Contrary to predictions that demand for cash will decline with the increased availability and use of non-cash payment means, currency demand has increased in the Euro area and the US over the past 15 years. Against this background, this short article summarizes recent findings from Jobst and Stix (2017), who provide a discussion of trends in currency demand, and presents additional descriptive evidence. In a first step, currency demand over a longer period is analyzed for the USA, Germany and the Euro area. This is helpful for understanding and assessing recent trends. In a second step, evidence from 70 economies is analyzed for the period from 2001 to 2014. This broader perspective informs us about the development for currencies that do not circulate internationally. Our descriptive account provides several insights: (i) Recent increases for the euro and the US dollar are strong even if seen over a 100 year horizon. (ii) Over the period from 2001 to 2014 currency demand has increased in many economies. (iii) In economies where currency demand increased, the increase typically happened after the start of the economic and financial crisis of 2007/08. What are the drivers of recent increases in currency demand? Jobst and Stix (2017) estimate panel money demand models, accounting for changes in GDP, interest rates and shadow economic activities. In economies with high GDP, a substantial share of the increase cannot be explained by changes in interest rates or in the size of the shadow economy. We conjecture that the unexplained component is related to increased hoarding.

Suggested Citation

  • Jobst, Clemens & Stix, Helmut, 2017. "Assessing recent increases in cash demand," International Cash Conference 2017 – War on Cash: Is there a Future for Cash? 162916, Deutsche Bundesbank.
    • Handle: RePEc:zbw:iccp17:162916
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    File URL: https://www.econstor.eu/bitstream/10419/162916/1/Stix.pdf
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    References listed on IDEAS

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    1. John Bagnall & David Bounie & Kim P. Huynh & Anneke Kosse & Tobias Schmidt & Scott Schuh, 2016. "Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 1-61, December.
    2. Gene Amromin & Sujit Chakravorti, 2009. "Whither Loose Change? The Diminishing Demand for Small-Denomination Currency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(2-3), pages 315-335, March.
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    6. Jobst, Clemens & Stix, Helmut, 2017. "Doomed to Disappear? The Surprising Return of Cash Across Time and Across Countries," CEPR Discussion Papers 12327, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Donato Masciandaro, 2018. "Central Bank Digital Cash and Cryptocurrencies: Insights from a New Baumol–Friedman Demand for Money," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 51(4), pages 540-550, December.
    2. Emanuele Borgonovo & Stefano Caselli & Alessandra Cillo & Donato Masciandaro, 2018. "Between Cash, Deposit And Bitcoin: Would We Like A Central Bank Digital Currency? Money Demand And Experimental Economics," BAFFI CAREFIN Working Papers 1875, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    3. Emanuele Borgonovo & Stefano Caselli & Alessandra Cillo & Donato Masciandaro, 2017. "Beyond Bitcoin And Cash: Do We Like A Central Bank Digital Currency? A Financial And Political Economics Approach," BAFFI CAREFIN Working Papers 1765, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    4. Maddalena Honorati & Sara Johansson de Silva & Natalia Millan & Florentin Kerschbaumer, 2019. "Work for a Better Future in Armenia," World Bank Publications - Reports 34412, The World Bank Group.
    5. Emanuele Borgonovo & Stefano Caselli & Alessandra Cillo & Donato Masciandaro & Giovanno Rabitti, 2018. "Cryptocurrencies, central bank digital cash, traditional money: does privacy matter?," BAFFI CAREFIN Working Papers 1895, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    6. Jacek Pietrucha, 2021. "Drivers of the Cash Paradox," Risks, MDPI, vol. 9(12), pages 1-17, December.

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