Dirty Money: Does the Risk of Infectious Disease Lower Demand for Cash?

Serhan Cevik

No 2020/255, IMF Working Papers from International Monetary Fund

Abstract: The coronavirus pandemic is a global crisis like no other in modern times, and there is a growing apprehension about handling potentially contaminated cash. This paper is the first empirical attempt in the literature to investigate whether the risk of infectious diseases affects demand for physical cash. Since the intensity of cash use may influence the spread of infectious diseases, this paper utilizes two-stage least squares (2SLS) methodology with instrumental variable (IV) to address omitted variable bias and account for potential endogeneity. The analysis indicates that the spread of infectious diseases lowers demand for physical cash, after controlling for macroeconomic, financial, and technological factors. While the transactional constraints imposed by the COVID-19 pandemic could become a catalyst for the use of digital technologies around the world, electronic payment methods may not be universally available in every country owing to financial and technological bottlenecks.

Keywords: Demand for cash; currency-in-circulation; digital money; infectious diseases; WP; cash use; handling cash; cash transfer; store of value; infectious-disease outbreak; payment method; coronavirus pandemic; Communicable diseases; Currencies; COVID-19; Deposit rates; Ebola; Global (search for similar items in EconPapers)
Pages: 15
Date: 2020-11-20
New Economics Papers: this item is included in nep-ban, nep-mon and nep-pay
References: Add references at CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=49877 (application/pdf)

Related works:
Journal Article: Dirty money: Does the risk of infectious disease lower demand for cash? (2020)
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:imf:imfwpa:2020/255

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().