Costs and Benefits to Phasing Out Paper Currency

Kenneth Rogoff

Working Paper from Harvard University OpenScholar

Abstract: Despite advances in transactions technologies, paper currency still constitutes a notable percentage of the money supply in most countries. For example, it constitutes roughly 10% of the US Federal Reserve?s main monetary aggregate, M2. Yet, it has important drawbacks. First, it can help facilitate activity in the underground (tax-evading) and illegal economy. Second, its existence creates the artifact of the zero bound on the nominal interest rate. On the other hand, the enduring popularity of paper currency generates many benefits, including substantial seigniorage revenue. This paper explores some of the issues associated with phasing out paper currency, especially large-denomination notes.

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Related works:
Journal Article: Costs and Benefits to Phasing out Paper Currency (2015)
Chapter: Costs and Benefits to Phasing out Paper Currency (2014)
Working Paper: Costs and Benefits to Phasing Out Paper Currency (2014)
Working Paper: Costs and Benefits to Phasing Out Paper Currency (2014)
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