DP16618 The Great Covid Cash Surge - Digitalisation Hasn't Dented Cash's Safe Haven Role

Author(s): Jonathan Ashworth, Charles A E Goodhart
Publication Date: October 2021
Date Revised: October 2021
Keyword(s): Banknote Issue and Withdrawal, cash, Covid 19, Panic Response
JEL(s): E40, E41, E49, N10, N20
Programme Areas: Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16618

The pandemic fuelled a remarkable surge in currency in circulation across most countries, with cash once again defying premature obituaries of its demise. The somewhat enforced intensification of the digitalisation of economies clearly appears to have further diminished cash's role as a medium of exchange. However, other important aspects of digitalisation, such as the growth in private digital currencies, haven't weakened cash's role as a store of value. The recent experience shows that in a major crisis people still want to retreat to the security and safety of holding bank notes, especially large denomination notes, to provide reassurance. When in trouble, people want to go back to the tried and true; in this respect holding paper money in their wallets.