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The case for cash

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  • McAndrews, James J.

Abstract

Cash is an extremely useful social contrivance. Kenneth Rogoff, who calls for phasing-out high denomination cash over time, recently discussed two possible drawbacks of high-denomination cash: the extensive use of high-denomination cash in crime and in illicit and corrupt activities and the role cash plays in preventing deeply negative nominal interest rates imposed on bank accounts. I will argue that using cash is preferable to the alternative, which entails worse types of crimes committed in the absence of cash. Consequently, the current high-denomination cash in the U.S. should be retained.

Suggested Citation

  • McAndrews, James J., 2020. "The case for cash," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 1(1).
    • Handle: RePEc:eee:lajcba:v:1:y:2020:i:1:s2666143820300041
    DOI: 10.1016/j.latcb.2020.100004
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    References listed on IDEAS

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    1. Kocherlakota, Narayana R., 2003. "Societal benefits of illiquid bonds," Journal of Economic Theory, Elsevier, vol. 108(2), pages 179-193, February.
    2. Ruchir Agarwal & Miles Kimball, 2015. "Breaking Through the Zero Lower Bound," IMF Working Papers 2015/224, International Monetary Fund.
    3. Kasey S. Buckles & Daniel M. Hungerman, 2018. "The Incidental Fertility Effects of School Condom Distribution Programs," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 37(3), pages 464-492, June.
    4. Kenneth S. Rogoff, 2016. "The Curse of Cash," Economics Books, Princeton University Press, edition 1, number 10798.
    5. Kenneth D. Garbade & James J. McAndrews, 2012. "If Interest Rates Go Negative . . . Or, Be Careful What You Wish For," Liberty Street Economics 20120829, Federal Reserve Bank of New York.
    6. Joseph Abadi & Markus Brunnermeier & Yann Koby, 2023. "The Reversal Interest Rate," American Economic Review, American Economic Association, vol. 113(8), pages 2084-2120, August.
    7. Kenneth D. Garbade & James J. McAndrews, 2015. "Interest-Bearing Securities When Interest Rates are Below Zero," Liberty Street Economics 20150504, Federal Reserve Bank of New York.
    8. Kenneth Rogoff, 1998. "Blessing or curse? Foreign and underground demand for euro notes," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 13(26), pages 262-303.
    9. Dick, Andrew R., 1995. "When does organized crime pay? A transaction cost analysis," International Review of Law and Economics, Elsevier, vol. 15(1), pages 25-45, January.
    10. James J. McAndrews, 2015. "Negative nominal central bank policy rates: where is the lower bound?," Speech 168, Federal Reserve Bank of New York.
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    Citations

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    Cited by:

    1. Edoardo Rainone, 2022. "Currency demand at negative policy rates," Temi di discussione (Economic working papers) 1359, Bank of Italy, Economic Research and International Relations Area.
    2. León, Carlos, 2021. "The dawn of a mobile payment scheme: The case of Movii," Working papers 78, Red Investigadores de Economía.
    3. León, Carlos, 2021. "The adoption of a mobile payment system: the user perspective," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 2(4).
    4. Batiz-Lazo, Bernardo & Bautista-González, Manuel A & González-Correa, Ignacio, 2021. "La transformación en el uso de efectivo y pagos digitales durante la pandemia de Covid-19 [Thye transformation in the use of cash and digital payments during the Covid-19 pandemioc]," MPRA Paper 109943, University Library of Munich, Germany.
    5. Arauz, Andrés & Garratt, Rodney & Ramos F., Diego F., 2021. "Dinero Electrónico: The rise and fall of Ecuador's central bank digital currency," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 2(2).
    6. Anton Schautzer & Helmut Stix, 2022. "Past and future development of euro cash in Austria – resilience in light of technological change and economic crises," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1-Q2/22, pages 21-46.

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    More about this item

    Keywords

    Cash; Debt; Crime;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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