Cash and Negative Interest Rates

Aleksander Berentsen and Fabian Schär

MPRA Paper from University Library of Munich, Germany

Abstract: Cash is accused of three sins: First, cash is inefficient and costly to use, and society would be better off without it. Second, it promotes crime, and facilitates money laundering and tax evasion. Third, it makes negative nominal interest rates infeasible. In certain situations, this may hinder central banks from implementing optimal monetary policies. In this article, we argue that all three accusations are fallacies; they are based on faulty reasoning. There is absolutely no need to limit the use of cash. On the contrary, societies should facilitate its use.

Keywords: Cash; Negative Interest Rates; Lower Bound (search for similar items in EconPapers)
JEL-codes: E4 E5 (search for similar items in EconPapers)
Date: 2016-01-01
New Economics Papers: this item is included in nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:70832

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