The Use of Cash in Europe and East Asia

Abstract

This is an opportune time to think about cash. First, some academics are arguing for the abolition of cash in order to make monetary policy more effective by enabling a further decline in interest rates into the negative zone. Second, the rapid development of retail electronic payment and the emergence of digital currencies are making us rethink seriously the future of cash. Third, there is a growing discussion about whether to abolish high denomination banknotes and limit the maximum value of cash transactions on the grounds that cash is often used in illicit activities. My belief is that money is more important than monetary policy. An optimum response differs both across countries and over time. When it comes to the various proposals on cash, we should carefully and thoroughly perform a cost-benefit analysis and, even if it proves favourable, we should then proceed only gradually, while nonetheless remaining open to new technology and ideas.