Copyright Page
© 2022 International Monetary Fund
WP/22/27
IMF Working Paper
Monetary and Capital Markets Department
Falling Use of Cash and Demand for Retail Central Bank Digital Currency
Prepared by Tanai Khiaonarong and David Humphrey*
Authorized for distribution by Tommaso Mancini Griffoli
February 2022
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: Cash use in most countries is falling slowly. On the margin, younger adults favor cash substitutes over cash. For older adults it is the reverse. Revealed preference tied to a changing population age structure seems to be the main influence on the demand for cash and why it is falling. Cash use may continue to fall, and card use (the main cash substitute) may fall by more, if CBDC is issued. The extent of this reduction depends on the demand for retail CBDC and the incentives (primarily transaction fees) that can play a determining role in CBDC adoption and use.
| JEL Classification Numbers: | E41, G21, D23 |
| Keywords: | Cash, card payments, payment substitution, central bank digital currency |
| Author’s E-Mail Address: | tkhiaonarong@imf.org; dhumphrey@cob.fsu.edu |
| JEL Classification Numbers: | E41, G21, D23 |
| Keywords: | Cash, card payments, payment substitution, central bank digital currency |
| Author’s E-Mail Address: | tkhiaonarong@imf.org; dhumphrey@cob.fsu.edu |
Title Page
WORKING PAPERS
Falling Use of Cash and Demand for Retail Central Bank Digital Currency
Prepared by Tanai Khiaonarong and David Humphrey
Contents
INTRODUCTION
CASH USE: DIFFERENT MEASURES FOR DIFFERENT PURPOSES
A. Cash Share Changes Across Countries
SOURCE OF THE DEMAND FOR CASH VERSUS ITS SUBSTITUTES
COST INCENTIVES TO ADOPT RETAIL CBDC
A. Incentives for the Payment User
B. Incentives for the Payment Receiver
SUMMARY
Figures
1. Cash Share by Country over 2012–2019 and Projection to 2022
2. Cash Share Values and Change in Population Age Structure by Country
Tables
1. Rising, Stable, or Falling Cash Use: All Countries, 2012–2019
2. Countries Ranked by Cash Share Level in 2019, Showing Annual Percentage Point and Percent Reductions Over 2012–2019
3. Pooled Regression Results, 2012–2019
Appendix
Data Sources
References