Physical vs Digital Currency: What's the Difference, Why it Matters

Nicola Amendola, Luis Araujo and Leo Ferraris

No 537, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: This paper compares digital and physical currency, focusing on a single intrinsic difference: digital, unlike physical, currency allows the authorities to trace the monetary flows in and out of the accounts. We show that this technological advance in record-keeping can be used to reward active balances relative to idle balances. This helps achieve efficiency in a wide range of circumstances.

Keywords: Cash; Digital Currency; Optimal Monetary Policy (search for similar items in EconPapers)
JEL-codes: E40 (search for similar items in EconPapers)
Pages: 33
Date: 2024-05
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mon and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:537

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