Demand for Cash and its Determinants - a Post-Crisis Approach

Ilona Skibińska-Fabrowska ()
Additional contact information
Ilona Skibińska-Fabrowska: Department of Insurance and Investments, Faculty of Economics, Maria Curie Sklodowska University, Lublin, Poland and Narodowy Bank Polski, Kraków, Poland

Journal of Central Banking Theory and Practice, 2023, vol. 12, issue 2, 103-131

Abstract: The use of cashless payment instruments has been on an increase over many years now. At the same time, demand for cash has been on the rise as well and we can observe a particularly high level of growth demand for banknotes during crisis times. The increase in demand for cash known as the "banknote paradox" is a phenomenon observed in many economies. It results from the existence of two streams of demand for cash - transactional and precautionary, and the differences in the directions of their changes from the point of view of the central bank and other entities involved in cash transactions, since it enables the optimization of cash supply management, which allows, on the one hand, to reduce the costs of cash processing and, on the other hand, to improve the effectiveness of monetary policy. This paper estimates the share of the transaction demand for cash with the aggregate demand. The strength and direction of the impact of selected macroeconomic and behavioural factors (uncertainty caused by the Global Financial Crisis and the Pandemic Crisis) on transaction and precautionary demand for cash were also assessed. A novel approach to the problem of demand for cash is based on considering the impact of macroeconomic shocks in the form of crises on the demand for cash.

Keywords: demand for cash; supply of cash; central bank; crisis. (search for similar items in EconPapers)
JEL-codes: E41 E47 E51 E52 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.cbcg.me/repec/cbk/journl/vol12no2-5.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cbk:journl:v:12:y:2023:i:2:p:103-131

Access Statistics for this article

More articles in Journal of Central Banking Theory and Practice from Central bank of Montenegro Contact information at EDIRC.
Bibliographic data for series maintained by ().