Understanding the demand for currency at home and abroad

Haasl, Thomas; Paulson, Anna L.; Schulhofer‐Wohl, Sam

doi:10.21033/cfl-2018-396

Cited by 3 publications

(2 citation statements)

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“…Several studies pointed out that the rising trend of US$100 issuance is attributable not to only domestic demand but also to foreign demand, which regards the US dollar as a safe haven currency, especially from emerging/developing economies with unstable financial systems and weak macroeconomic fundamentals (Haasl, Schulhofer-Wohl, and Paulson 2018;Judson 2017). High demand for the banknotes from abroad is unique to the case of the US dollar, given the dominant status of the US dollar in various cross-border transactions.…”

Section: Economies With Greater Demand For Highest-denomination Banknmentioning

confidence: 99%

Growing Global Demand for Cash

Shirai¹,

Sugandi²

2019

IBR

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Demand for cash is generally known to be influenced by several factors—including transaction motive used for payment, opportunity cost, precautionary motive, and other motives (such as aging and demand from abroad). In recent years, cashless payment methods have increasingly become prevalent in the world through various conventional tools and innovative convenient financial services using mobile phones and smart phones. Nevertheless, cash in circulation has been rising in many economies, especially after the global financial crisis. This paper seeks to examine factors affecting cash in circulation for 22 economies for the period 2000–2018. It also investigated the movements of banknotes in circulation differentiated by denomination for seven economies whose data were available. The empirical analysis of this paper found that the opportunity cost proxied by the central bank policy rates and age-related variable were the two most important robust determinants for cash demand. Namely, cash demand tends to grow with a decline in the policy rates and with an advancement of aging.

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Section: Economies With Greater Demand For Highest-denomination Banknmentioning

confidence: 99%

Growing Global Demand for Cash

Shirai¹,

Sugandi²

2019

IBR

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“…Because of its status as a global reserve currency, the demand for U.S. dollars has nonetheless remained robust, particularly outside the United States (Figure 1, solid blue line). Haasi, Schulhofer-Wohl and Paulson (2018) estimate that a significant and increasing share of U.S. dollars circulate outside the United States (Note 5). We adjust the demand for U.S. dollars in the United States to the share of dollars held abroad and conclude that it might have fallen to 3 percent of GDP in 2020 (Figure 1, dotted blue line).…”

Section: Introductionmentioning

confidence: 99%

Second Thoughts About Central Bank Digital Currencies

Kovanen¹

2021

AEF

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Sustained decline in central banks’ monetary liabilities (reserves and currency in circulation), which the emergency of cryptocurrencies may have hastened, has been enabled by technological innovations that over time have allowed financial institutions and their customers to execute transactions and settle their debts without resorting to central bank currency. Policymakers are concerned about their ability to guarantee public’s access to government-backed currency. This has implications for central banks’ balance sheet and income position, which central bank digital currency might reconstitute. But the introduction of central bank digital currency (CBDC) comes with its own risks and could be disruptive for financial markets. We believe that retaining the option to have access to government-guaranteed currency is of utmost importance, despite the sporadic demand for physical currency in the modern society, but it could be addressed within existing institutional structures without the introduction of CBDC. However, policy authorities are right in seeking oversight and regulation for cryptocurrencies to address the destabilizing potential of cryptocurrencies for financial markets, and they should continue modernizing payment infrastructures to bring retail settlement systems at par with cryptocurrencies in terms of settlement speed but without associated liquidity and credit risks. These steps would preserve the status quo and allow private sector to continue innovating while limiting central banks’ footprint in the financial markets.

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The Special Role of the United States in the Global Financial System

Elson

2019

The United States in the World Economy

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Understanding the demand for currency at home and abroad

Cited by 3 publications

References 1 publication

Growing Global Demand for Cash

Growing Global Demand for Cash

Second Thoughts About Central Bank Digital Currencies

The Special Role of the United States in the Global Financial System

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