Implications of the Expanding Use of Cash for Monetary Policy

Daniel Gros

CEPS Papers from Centre for European Policy Studies

Abstract: Financial innovation seems to have had little impact on the oldest medium of transaction, namely cash. The ratio of currency in circulation to GDP has increased in most countries, independently of the continuing spread of cashless transactions. Currency is part of the monetary base. Its increase thus leads to an automatic increase in central banks’ balance sheets. This becomes relevant when the size of a central bank’s balance sheet becomes a policy instrument. Taking account of the increase in cash holdings can lead to a different view of the monetary policy stance over longer periods of time. Holding the size of the overall balance sheet constant is equivalent to a gradual exit when currency holdings continue to increase.

Pages: 19 pages
Date: 2017-06
New Economics Papers: this item is included in nep-mac, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.ceps.eu/system/files/PI2017-21_ExpandingUseOfCash.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:eps:cepswp:12661

Access Statistics for this paper

More papers in CEPS Papers from Centre for European Policy Studies Contact information at EDIRC.
Bibliographic data for series maintained by Margarita Minkova ().