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Money, privacy, anonymity: What do experiments tell us?

Emanuele Borgonovo, Stefano Caselli, Alessandra Cillo, Donato Masciandaro () and Giovanni Rabitti

Journal of Financial Stability, 2021, vol. 56, issue C

Abstract: The attention paid to the role of money as a store of privacy is increasing. In a monetary transaction, full privacy protection coincides with anonymity. In such situations, an empirical question arises: Is anonymity relevant in shaping the demand for money? We attempt to answer this question through laboratory experiments. The results show that anonymity matters and increases the overall appeal of a medium of payment, and that this effect is stronger for risk-prone individuals. Moreover, the trade-off between the two properties of liquidity and return is relatively high – to accept higher illiquidity risks, individuals require a more-than-proportional increase in the expected return. In general, the experiments suggest that the future attractiveness of alternative currencies depends on whether the three properties of money are mixed in a way that is consistent with the individual’s preferences.

Keywords: Money demand; Privacy; Anonymity; Cash; Private digital currencies; Central bank digital currencies; Experimental economics (search for similar items in EconPapers)
JEL-codes: C9 E4 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jfs.2021.100934

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