June 2020 issue contents
The Surprising Recovery of Currency Usage

Jonathan Ashwortha and Charles A.E. Goodhartb


Currency usage began a long trend decline in the decades after World War II. This was expected to continue, and even accelerate, owing to payment technology innovations. Surprisingly, however, such usage as a percentage of GDP stopped falling and has increased quite sharply in recent years in most countries, with Sweden the major outlier. We examine to what extent this may have been due to increasing interest elasticity, nearing the zero lower bound, and also to rising tax evasion, as indirect taxes rise. We also show how currency holdings increased temporarily as the financial crisis struck in 2008.

JEL Code: E40, E49, E63, H26, N10, N20.

Full article (PDF, 39 pages, 2,191 kb)

a Independent Economist
b London School of Economics