Specifically, Jobst and Stix (2017) have collected data from around 70 economies for the period from 2001 to 2014. To separate out domestic and international factors we have to enlarge our sample. dollar and euro could also have been due to international demand. Potentially, the recent upsurge in the circulation of U.S. dollars and euros circulates outside their monetary area, which explains part of the high per capita holdings of these two currencies (Bartzsch, Ro sl and Seitz, 2013 Judson, 2017 Assenmacher, Seitz and Tenhofen, 2017 for Switzerland). dollar and the euro are unrepresentative for the circulation of cash at large. Stylized facts on the recent upsurge in cash demandĭevelopments in the circulation of the U.S. While hard evidence is difficult to come by, our results support the conjecture that cash demand was driven by a higher level of economic uncertainty pertaining since the financial crisis of 2008.Ģ. We show that conventional economic factors like low interest rates can account for some part of the increase but leave a notable part unexplained. The panel setting also allows us to econometrically study the recent drivers of cash demand. This perspective underscores that the recent increase is broad-based and can be observed in very different economies. Second, we collected data on currency circulation from 2001 until 2014 for a sample of 70 economies. This perspective shows that the recent increase is sizeable and compares to a similar upsurge in the wake of the financial crisis of the 1930s. We extend the investigation back to the late 19th century for the United States and Germany. the post-World War II period) or on relatively few economies (e.g. To assess and to understand recent trends, we suggest to analyze currency demand from a broader perspective by going beyond the literature’s typically rather narrow focus on either relatively short time periods (e.g. lower interest rates, or are there alternative explanations? What does the apparent demand for cash imply for plans to phase out or at least restrict the use of cash as recently proposed by several economists? In this short paper we summarize results of Jobst and Stix (2017). What is even more puzzling, in recent years cash circulation has gone up sizably in the euro area, the U.S.A., Switzerland and Japan, notably after 2007 (chart 1).īoth the magnitude of cash circulation and its increase over the past decade(s) raise crucial questions for central banks and economic policy makers alike: What explains the puzzling size of cash circulation? Can the extent and the increase over time be explained by conventional economic forces, e.g. People (still) hold enormous amounts of physical cash: In 2014, per capita holdings were around USD 4,000 in the euro area and the U.S.A. This story however does not match up with the empirical evidence. 2014), is about to enter a fundamentally new phase. Thanks to internet, mobile phones and NFC the use of cashless payment technologies in industrialized economies, which has already been progressing over the past decades (Amromin and Chakravorti 2009 Bagnall et al. It has already almost done so in Sweden and it will do so everywhere else rather soon. If we were to believe technology cheerleaders (c.f. While hard evidence is difficult to come by, we conjecture that cash demand was driven by the higher level of economic uncertainty pertaining since the financial crisis of 2008, which resulted in hoarding. Panel money demand models show that conventional economic factors like low interest rates can account for some part of the increase but leave a notable part unexplained, in particular in rich economies. Finally, in economies where currency demand increased, the increase typically took place after the start of the economic and financial crisis of 2007/08. Investigating evidence for the United States and Germany for the past 140 years shows that the recent increase is sizeable and compares to a similar upsurge in the wake of the 1930s financial crisis. dollar or the euro but can be observed in very different economies. Data on currency circulation from 2001 until 2014 for a sample of 70 economies reveals that the recent increase in circulation is not confined to international currencies like the U.S. In this context, this short article summarizes recent findings from Jobst and Stix (2017), broadening the scope both along the spatial and the time dimensions. Is cash back? Assessing the recent increase in cash demandĬontrary 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 U.S.A.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |