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Implications of the Expanding Use of Cash for Monetary Policy. CEPS Policy Contribution No 2017/21, June 2017

Gros, Daniel. (2017) Implications of the Expanding Use of Cash for Monetary Policy. CEPS Policy Contribution No 2017/21, June 2017. [Policy Paper]

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    Abstract

    Financial innovation seems to have had little impact on the oldest medium of transaction, namely cash. The ratio of currency in circulation to GDP has increased in most countries, independently of the continuing spread of cashless transactions. Currency is part of the monetary base. Its increase thus leads to an automatic increase in central banks’ balance sheets. This becomes relevant when the size of a central bank’s balance sheet becomes a policy instrument. Taking account of the increase in cash holdings can lead to a different view of the monetary policy stance over longer periods of time. Holding the size of the overall balance sheet constant is equivalent to a gradual exit when currency holdings continue to increase.

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    Item Type: Policy Paper
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > monetary policy
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Centre for European Policy Studies (Brussels) > CEPS Policy Insights
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 23 Jun 2017 15:26
    Number of Pages: 19
    Last Modified: 23 Jun 2017 15:26
    URI: http://aei.pitt.edu/id/eprint/88049

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