Implications of the expanding use of cash for monetary policy

Please note: Each In-Depth Analysis is assigned a DOI (digital object identifier), which is a safe and long term way of ensuring a hyperlink to the full text of this report. However, when ESO creates this record, on occasion the DOI still has not been activated by the EU Bookshop. If you find the source url hyperlink does not work please use the alternative location hyperlink listed as a related url.Financial innovation seems to have had little impact on the oldest medium of transaction, namely cash. The ratio of currency in circulation to GDP has increased in most countries, independently of the continuing spread of cashless transactions. Taking account of the increase in cash holdings can lead to a different view of the monetary policy stance over longer periods of time. Holding the size of the overall balance sheet constant is equivalent to a gradual exit when currency holdings continue to increase.

European Parliament: European Parliamentary Research Service: In-Depth Analysis, May 2017: Implications of the expanding use of cash for monetary policy http://www.europarl.europa.eu/RegData/etudes/IDAN/2017/602041/IPOL_IDA(2017)602041_EN.pdf

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