Cashless Society Supports Friedman’s Theories

An undergraduate study in Nigeria has been published by the Munich Personal RePEc Archive which considers what happens to money, monetary policy and financial assets ¹ when cash demand falls. While highly theoretical, it does not touch on the practicalities of implementation such as financial inclusion, the necessary technology infrastructure or public acceptance, it does point towards some useful findings for policy makers.

Economic theory: the paper reminds us of some theory, the opposing views of John Maynard Keynes and Milton Friedman and the development of new approaches in more recent times.

Keynes argued that the need for money is driven by transactions, preventative and speculative reasons. Changes in money demand impact overall economic demand and inflationary pressures. Friedman saw money supply as key with fluctuations being the primary cause of inflation requiring prudent money supply management as key.