Growing Global Demand for Cash

Sayuri Shirai and Eric Alexander Sugandi

International Business Research, 2019, vol. 12, issue 12, 74

Abstract: Demand for cash is generally known to be influenced by several factors—including transaction motive used for payment, opportunity cost, precautionary motive, and other motives (such as aging and demand from abroad). In recent years, cashless payment methods have increasingly become prevalent in the world through various conventional tools and innovative convenient financial services using mobile phones and smart phones. Nevertheless, cash in circulation has been rising in many economies, especially after the global financial crisis. This paper seeks to examine factors affecting cash in circulation for 22 economies for the period 2000–2018. It also investigated the movements of banknotes in circulation differentiated by denomination for seven economies whose data were available. The empirical analysis of this paper found that the opportunity cost proxied by the central bank policy rates and age-related variable were the two most important robust determinants for cash demand. Namely, cash demand tends to grow with a decline in the policy rates and with an advancement of aging.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ibrjnl:v:12:y:2019:i:12:p:74

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