The great Covid cash surge - digitalisation hasn't dented cash's safe haven role

Jonathan Ashworth and C. A. E. Goodhart

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: There is a debate about the effect of the extremely low, or even negative, interest rate regime on bank profitability. On the one hand it raises demand and thereby adds to bank profits, while on the other hand it lowers net interest margins, especially at the Zero Lower Bound. In this paper we review whether the prior paper by Altavilla, Boucinha and Peydro (2018) on this question for the Eurozone can be generalized to other monetary blocs, i.e. USA and UK. While our findings have some similarity with their earlier work, we are more concerned about the possible negative effects of this regime, not only on bank profitability but also on bank credit extension more widely.

Keywords: cash; banknote issue and withdrawal; Covid-19; panic response; coronavirus (search for similar items in EconPapers)
JEL-codes: E40 E41 E49 N10 N20 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2021-10-07
New Economics Papers: this item is included in nep-ban, nep-his, nep-mac, nep-mon, nep-pay and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:112432

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