The evolution of cash transactions: some implications for monetary policy

Stacey Schreft and Bruce Smith

No 97-04, Financial Services working paper from Federal Reserve Bank of Cleveland

Abstract: This paper considers the implications of a decreasing demand for cash transactions under several monetary policy regimes. A policy of nominal-interest-rate targeting implies that a secular decline in the volume of cash transactions unambiguously leads to accelerating inflation. A policy of maintaining a fixed composition of government liabilities leads to accelerating (decelerating) inflation if agents have sufficiently high (low) levels of risk aversion. A policy of inflation targeting produces falling nominal and real interest rates, while a policy of fixing the rate of money growth can easily lead to indeterminacy and endogenous oscillation in interest rates.

Keywords: Payment systems; Monetary policy - United States; Money (search for similar items in EconPapers)
Date: 1997
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Related works:
Journal Article: The evolution of cash transactions: Some implications for monetary policy (2000)
Working Paper: The evolution of cash transactions: some implications for monetary policy (1999)
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