Doomed to Disappear? The Surprising Return of Cash Across Time and Across Countries

57 Pages Posted: 26 Sep 2017

See all articles by Clemens Jobst

Clemens Jobst

Departement of Economic and Social History; Centre for Economic Policy Research (CEPR)

Helmut Stix

Oesterreichische Nationalbank - Economic Studies Division

Date Written: September 2017

Abstract

The circulation of cash has increased in many economies over the past decade. To understand this development we provide evidence from two perspectives. First, we analyze long time series from the late 19th century to 2015 for several economies. Second, we collect evidence from 70 economies from 2001 to 2014. The descriptive account provides two main findings: (i) Recent increases for the euro, the US dollar and the Swiss franc are strong if seen over a 100 year horizon, (ii) increases can be observed in the majority of the 72 economies over the period from 2001 to 2014. Panel money demand models show that interest rates or GDP can only partially explain the increases in cash demand. The size of the shadow economy is not found to be an important factor for this period. We find that cash demand has evolved in line with a standard money demand model in economies with no record of financial crises. For economies that had a financial crisis in 2008, we find an increase in cash demand, on average. However, an "unexplained" increase is also obtained for wealthier economies that did not have a financial crisis in 2007/08 but before. We conjecture that the level shift in cash demand is related to increased uncertainty.

Keywords: cash, Demand for currency, Financial crises, international comparison, monetary history

JEL Classification: E41, E42, N10

Suggested Citation

Jobst, Clemens and Stix, Helmut, Doomed to Disappear? The Surprising Return of Cash Across Time and Across Countries (September 2017). CEPR Discussion Paper No. DP12327, Available at SSRN: https://ssrn.com/abstract=3042640

Clemens Jobst (Contact Author)

Departement of Economic and Social History ( email )

Universit├Ątsring 1
Vienna, Vienna 1010
Austria

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Helmut Stix

Oesterreichische Nationalbank - Economic Studies Division ( email )

Otto-Wagner Platz 3
POB 61
Vienna 1011
Austria

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