The effects of negative interest rates on cash usage: Evidence for EU countries

José M. Liñares-Zegarra and Magnus Willesson

Economics Letters, 2021, vol. 198, issue C

Abstract: Changes in interest rates below the zero lower bound could have potential effects on the payments market by making cash more attractive for consumers as a medium of payment and wealth storage. This paper studies how cash usage has been affected by the recent introduction of negative interest rates in European countries. Using a difference-in-differences methodology over the period 2006–2018, results show an increase in cash usage in negative interest-rate environments. We also find that the increase in cash usage was less pronounced in countries with superior monitoring capacity of banks (i.e. high levels of financial intermediation).

Keywords: Negative interest rates; Europe; Cash; Bank monitoring; Financial intermediation (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:198:y:2021:i:c:s0165176520304341

DOI: 10.1016/j.econlet.2020.109674

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