Dirty Money and the Demand for Cash

In IMF Working Paper 2020 255, entitled ‘Dirty Money: Does the Risk of Infectious Disease Lower Demand for Cash?’, its author Serhan Cevik – a senior economist with the IMF – looked at data from 133 countries between 1995 and 2017 to understand how people react to a rise in infectious diseases. Against his initial study he then ran a further five subsets of data to test his findings. After controlling for macroeconomic, financial and technological factors, the data was clear that a rise in infectious disease reduces the demand for physical cash.

The paper set the scene, today’s pandemic, and was clear that there is no unambiguous evidence of a link between cash and COVID-19. The WHO’s statement that cash is safe, but wash your hands, and a number of studies into cash and COVID-19 were quoted. However, he noted that the perception of risk is important and can drive a precautionary adjustment in behaviour.