Hanna Armelius, Carl Andreas Claussen, André Reslow, 12 September 2020

While the ratio of physical cash to GDP has increased in most countries over the last years, it has fallen dramatically in Sweden. This column argues that rather than being ahead of the curve, a unique combination of events and policy measures have led to the falling cash demand in Sweden. Among those are measures to reduce tax evasion and the informal sector, an aggressive notes changeover, the introduction of an electronic payment app, the withdrawal of central bank subsidies to cash distribution, and a track record of protecting commercial bank money during crises.

Adam Brzezinski, Yao Chen, Nuno Palma, Felix Ward, 14 November 2019

During the early 16th to 19th centuries, Spain received large amounts of monetary silver from its colonies in America. Vagaries of the sea thus affected Spain’s money supply. This column investigates the effects of money supply shocks on the economy using the case of maritime disasters in the Spanish Empire. It finds that a one-percentage-point reduction in the money growth rate caused a 1.3% drop in real output that persisted for several years. Analysing monetary transmission channels, it shows that price rigidities and credit frictions account for most of this non-neutrality result.

Sayuri Shirai, Eric Alexander Sugandi, 16 October 2019

Although cashless payments are becoming increasingly common, the demand for cash is rising in many advanced economies. One reason for this is cash hoarding. The column uses data on cash issuance to examine the scale of, and motives for, cash hoarding. The two most important drivers are monetary easing and the preference of older people for cash.

Gabriel Chodorow-Reich, 20 August 2019

India's demonetisation in 2016 reduced the volume of currency in circulation by 75% overnight. This column uses new data sources to quantify impacts on economic activity and credit growth after the unprecedented natural experiment. These effects can teach us about the short-run economic disruption and long-run benefits of demonetisation. 

Sayuri Shirai, 06 March 2019

Recent years have seen the emergence of digital currencies such as Bitcoin as potential private sector money. Central banks are also considering whether to issue their own digital tokens to enable decentralised verification of transactions while maintaining attractive cash-like features. This column lays out the four existing proposals for implementing central bank digital currency. Due largely to technical constraints, however, central banks in general have not found a compelling reason to issue their own digital currency.

Antonio Fatás, Beatrice Weder di Mauro, 07 May 2018

Economists have been dismissive of cryptocurrencies, but fintech entrepreneurs and enthusiasts continue to see their disruptive potential. This column considers the theoretical and practical arguments on both sides of the debate. Traditional currencies are overwhelmingly superior as forms of money, and cryptocurrencies’ advantage in terms of lax regulation is unlikely to last. There remains, however, ample potential for innovation in payment systems.

K. Kıvanç Karaman, Sevket Pamuk, Seçil Yıldırım-Karaman, 24 February 2018

There is a notable lack of long-run analyses of monetary systems and their stability. This column addresses this gap by looking at the monetary systems of major European states between 1300 and 1914. The evidence collected suggests that, despite many switches between standards and systems, fiscal capacity and political regimes ultimately shaped patterns of monetary stability. Theories of monetary stability that rely on the mechanics of monetary systems perform poorly when such a long-run perspective is taken.

Biagio Bossone, 25 January 2017

Electronic money – digital payment instruments that store value – can be seen simply as a technological innovation for holding and accessing regular money. This column argues that how it is used and regulated will determine whether e-money instead serves as a replacement for existing money, and discusses the regulatory implications.

Alex Cukierman, 30 March 2016

The quantity theory of money implies that sustained inflation requires a sustained increase in the money supply. It does not, however, imply that the reverse is also true. This column explores and illustrates this issue by comparing inflation in the US following the collapse of Lehman Brothers with Germany’s hyperinflation experience after WWI. A key factor explaining the vastly different inflation experiences is how the monetary expansion translated into demand. The Fed’s base expansion did not translate into demand for goods and services, whereas the German monetary expansion was motivated by the government’s hunger for seigniorage revenues.

Dirk Niepelt, 21 January 2015

Recent experience with the zero lower bound on nominal interest rates, and the use of high-denomination notes by criminals and tax evaders, have led to revived proposals to phase out cash. This column argues that abolishing cash may be neither necessary nor sufficient to overcome the zero lower bound problem, and would severely undermine privacy. Allowing the public to hold reserves at central banks could reduce the need for deposit insurance, although the transition to the new regime and the effects on credit supply must be carefully considered.

Alan M. Taylor, Moritz Schularick, 08 December 2009

Are credit bubbles dangerous? This column presents long-run historical data showing that, over the past 140 years, episodes of financial instability were often the result of "credit booms gone wrong". Recent years witnessed an unprecedented expansion in the role of credit in the macroeconomy. It is a mishap of history that – just as credit matters more than ever before – the reigning doctrine gives it no role in central bank policies.


CEPR Policy Research