The paradox of banknotes: Understanding the demand for cash beyond transactional use

Alejandro Zamora-Pérez

Economic Bulletin Articles, 2021, vol. 2

Abstract: What explains the strong growth of euro banknote demand, given that the transactional use of banknotes seems to have decreased? Key to explaining this phenomenon – referred to as the “paradox of banknotes” – is acknowledgement of the importance of all three components of banknote demand: euro area transactional demand, euro area store-of-value demand and foreign demand. This article explains these components and estimates their relative size. It also addresses COVID-19-related banknote developments during 2020, highlighting the importance of cash during crises. JEL Classification: E41, E51, E58

Keywords: banknotes; cash; Euro; foreign demand for money; payments; store of value (search for similar items in EconPapers)
Date: 2021-03
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbart:2021:0002:3

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