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Cash, COVID-19 and the Prospects for a Canadian Digital Dollar

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  • Walter Engert
  • Kim Huynh

Abstract

We provide an analysis of cash trends in Canada before and during the COVID-19 pandemic. Focusing on the pandemic period, we explore the implications on demand for, use of and access to cash. We find that cash demand has been strong pre-pandemic and increased sharply during the pandemic. While cash use fell initially due to the decreased number of in-person shopping opportunities, it recovered as containment measures eased. We explore the potential two scenarios for issuance of central bank digital currency or Canadian digital dollar. We discuss the Canadian experience in maintaining cash as an efficient and accessible method of payment and store of value.

Suggested Citation

  • Walter Engert & Kim Huynh, 2022. "Cash, COVID-19 and the Prospects for a Canadian Digital Dollar," Discussion Papers 2022-17, Bank of Canada.
    • Handle: RePEc:bca:bocadp:22-17
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    References listed on IDEAS

    as
    1. Kim Huynh & Gradon Nicholls & Oleksandr Shcherbakov, 2022. "Equilibrium in Two-Sided Markets for Payments: Consumer Awareness and the Welfare Cost of the Interchange Fee," Staff Working Papers 22-15, Bank of Canada.
    2. Charles Spencer, 2011. "Supplementary article: Paying with Polymer: Developing Canada’s New Bank Notes," Bank of Canada Review, Bank of Canada, vol. 2011(Spring), pages 37-45.
    3. Morten Linnemann Bech & Umar Faruqui & Frederik Ougaard & Cristina Picillo, 2018. "Payments are a-changin' but cash still rules," BIS Quarterly Review, Bank for International Settlements, March.
    4. Heng Chen & Walter Engert & Kim Huynh & Daneal O’Habib & Joy Wu & Julia Zhu, 2022. "Cash and COVID-19: What happened in 2021," Discussion Papers 2022-8, Bank of Canada.
    5. Ben Fung & Kim Huynh & Anneke Kosse, 2017. "Acceptance and Use of Payments at the Point of Sale in Canada," Bank of Canada Review, Bank of Canada, vol. 2017(Autumn), pages 14-26.
    6. Heng Chen & Walter Engert & Kim Huynh & Gradon Nicholls & Mitchell Nicholson & Julia Zhu, 2020. "Cash and COVID-19: The impact of the pandemic on demand for and use of cash," Discussion Papers 2020-6, Bank of Canada.
    7. William Jack & Tavneet Suri, 2011. "Mobile Money: The Economics of M-PESA," NBER Working Papers 16721, National Bureau of Economic Research, Inc.
    8. Rod Garratt & Michael Junho Lee & Antoine Martin & Joseph Torregrossa, 2022. "The Future of Payments Is Not Stablecoins," Liberty Street Economics 20220207, Federal Reserve Bank of New York.
    9. Ben Fung & Enchuan Shao, 2011. "Modelling the Counterfeiting of Bank Notes: A Literature Review," Bank of Canada Review, Bank of Canada, vol. 2011(Autumn), pages 29-35.
    10. Heng Chen & Matthew Strathearn, 2020. "A Spatial Model of Bank Branches in Canada," Staff Working Papers 20-4, Bank of Canada.
    11. Heng Chen & Walter Engert & Kim Huynh & Gradon Nicholls & Julia Zhu, 2021. "Cash and COVID-19: The Effects of Lifting Containment Measures on Cash Demand and Use," Discussion Papers 2021-3, Bank of Canada.
    12. Walter Engert & Ben Fung, 2019. "Cashless Bank Branches in Canada," Staff Analytical Notes 2019-29, Bank of Canada.
    13. Kim Huynh & Jozsef Molnar & Oleksandr Shcherbakov & Qinghui Yu, 2020. "Demand for Payment Services and Consumer Welfare: The Introduction of a Central Bank Digital Currency," Staff Working Papers 20-7, Bank of Canada.
    14. Kim Huynh & Gradon Nicholls & Oleksandr Shcherbakov, 2019. "Explaining the Interplay Between Merchant Acceptance and Consumer Adoption in Two-Sided Markets for Payment Methods," Staff Working Papers 19-32, Bank of Canada.
    15. Heng Chen & Walter Engert & Kim Huynh & Daneal O’Habib, 2021. "An Exploration of First Nations Reserves and Access to Cash," Discussion Papers 2021-8, Bank of Canada.
    16. Heng Chen & Marie-Hélène Felt & Christopher Henry, 2018. "2017 Methods-of-Payment Survey: Sample Calibration and Variance Estimation," Technical Reports 114, Bank of Canada.
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    Cited by:

    1. Hongyu Xiao, 2024. "Demand for Canadian Banknotes from International Travel: Indirect Evidence from the COVID-19 Pandemic," Staff Working Papers 24-23, Bank of Canada.
    2. Christopher Henry & Matthew Shimoda & Julia Zhu, 2022. "2021 Methods-of-Payment Survey Report," Discussion Papers 2022-23, Bank of Canada.

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    More about this item

    Keywords

    Bank notes; Central bank research; Coronavirus disease (COVID-19); Digital currencies and fintech; Econometric and statistical methods;
    All these keywords.

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • E - Macroeconomics and Monetary Economics
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • O - Economic Development, Innovation, Technological Change, and Growth
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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