Understanding Household Demand for Cash

When disruption occurs and the past is no longer a reliable starting point and guide for the future, understanding the fundamentals is important. A recent paper published in CESIFO working papers (8574 2020) adds to our knowledge of household demand for cash.

The paper was written by Hans-Eggert Reimers, Friedrich Schneider and Franz Seitz with the title, ‘Payment Innovations, the Shadow Economy and Cash Demand of Households in Euro Area Countries’. 

Its starting point is that insufficient research has been done to explain why the ratio of euro notes in circulation to GDP has increased by 2.5 times between its launch in 2002 and 2019. Even with 30% of euro notes circulating abroad, this increase remains unexplained. This paper starts with private households.