Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/286361 
Year of Publication: 
2023
Series/Report no.: 
IES Working Paper No. 32/2023
Publisher: 
Charles University in Prague, Institute of Economic Studies (IES), Prague
Abstract: 
Digital payments are growing rapidly, and the use of cash seems to be declining, at least in advanced economies in Europe and the U.S. However, the literature on payment systems provides an interesting perspective- cash, or currency, when measured as a percentage of the gross domestic product, has not been falling as clearly as might be intuited. Contrarily, many economies face an increase in currency in circulation rates. This paper discusses this topic in literature and explores the determinants of currency in circulation in a panel of 17 countries between 2001-2022 and whether determinants from prior literature are also significant across a group of heterogeneous countries. Interest rates are found to affect the demand for cash significantly and negatively, while tax revenues have a significantly positive impact. Some measures of financial development are also considered but are found to not have any strong explanatory power. Country fixed effects regression analysis suggests that determining what type of economies may have higher or lower currency in circulation is a complex matter requiring more detailed investigation.
Subjects: 
Currency in circulation
Monetary demand
Panel data
Fixed-effects regression
Interest rates
tax revenue
JEL: 
E12
E41
E50
E51
Document Type: 
Working Paper

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