Abstract
While due to technological development, the notion of cash is changing, the function and future of cash is entering the monetary debate. Proponents of a cashless society point to cost considerations, the prospect of widening anti-deflationary monetary policy into the realm of negative interest rates, as well as the chances of repressing the shadow economy. As such expectations are being contested, the discussion of the pros and cons of a cashless society is in full swing. Against this backdrop, the contributions to this volume analyse the use of cash in various East Asian economies or examine specific aspects of cash usage. Taken together, the contributions show that many issues related to cash still remain without a solid research foundation. Any top-down moves to reduce the role of cash or to head towards a “cashless society” should therefore be taken with great care and only gradually.
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Notes
- 1.
Laeven and Valencia (2008).
- 2.
Letzing (2017).
- 3.
Rogoff (2016).
- 4.
On 8 November 2016, Indian Prime Minister Narendra Modi made the surprise announcement that all 500- and 1000-rupee notes, amounting to more than 85% per value of the cash in circulation , would be withdrawn in order to fight illicit activities, corruption , terrorism , and to lead India to a modern pathway of a cashless society . Most Indians, however, do not have bank accounts and the newly designed 500- and 2000-rupee notes as substitutes were not sufficiently available yet. Social unrest occurred and the economy was damaged by slowing sales and production already in the two months following Prime Minister Modi’s announcement; see Frankfurter Allgemeine Zeitung (2017) and The Economist (2016).
- 5.
Beer et al. (2015, p. 1).
- 6.
- 7.
“Secular stagnation” describes a situation of prolonged low to negative growth. Recent discussions have focused on the possibility of an oversupply of savings . Such an oversupply could only be brought to an equilibrium with investments, if the real interest rate —which can be derived at by deducting the rate of inflation from the nominal interest rate —becomes negative ; see Summers (2014), and Weizsäcker (2015).
- 8.
See, for example, Rösl and Seitz (2015, pp. 525–528).
- 9.
Häring elaborates on the potential misuse of data gained by the use of electronic payment methods. Häring (2016, pp. 85–111).
- 10.
Kirchgässner (2017) provides an overview and critique of this and other approaches for estimating shadow economies .
- 11.
See, for example , Rogoff (2016, pp. 58–79).
- 12.
Potential effects of negative interest rates on financial stability are pointed out by Beer et al. (2015, pp. 4–6).
- 13.
Krüger points out that a bank run can have stabilising effects, if people are able to withdraw their money. A bank run thus can work like a “safety valve”. Without the possibility of non-banks to withdraw funds however frantic buying and selling of assets might occur with further destabilising effects. Krüger (2016, pp. 61–63).
- 14.
Several potential effects of negative interest rates on financial stability like an impairment of the monetary policy transmission mechanism, a build-up of price bubbles and a misallocation of resources are indicated by Beer et al. (2015, pp. 4–6).
- 15.
Schneider and Linsbauer (2016, p. 92).
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Rövekamp, F., Bälz, M., Hilpert, H.G. (2017). On the Role of Cash in East Asia. In: Rövekamp, F., Bälz, M., Hilpert, H. (eds) Cash in East Asia. Financial and Monetary Policy Studies, vol 44. Springer, Cham. https://doi.org/10.1007/978-3-319-59846-8_1
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