<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The use of cashless payment instruments has been on an increase over many years now. At the same time, demand for cash has been on the rise as well and we can observe a particularly high level of growth demand for banknotes during crisis times. The increase in demand for cash known as the “banknote paradox” is a phenomenon observed in many economies. It results from the existence of two streams of demand for cash - transactional and precautionary, and the differences in the directions of their changes from the point of view of the central bank and other entities involved in cash transactions, since it enables the optimization of cash supply management, which allows, on the one hand, to reduce the costs of cash processing and, on the other hand, to improve the effectiveness of monetary policy. This paper estimates the share of the transaction demand for cash with the aggregate demand. The strength and direction of the impact of selected macroeconomic and behavioural factors (uncertainty caused by the Global Financial Crisis and the Pandemic Crisis) on transaction and precautionary demand for cash were also assessed. A novel approach to the problem of demand for cash is based on considering the impact of macroeconomic shocks in the form of crises on the demand for cash.</p>
</abstract>

The use of cashless payment instruments has been on an increase over many years now. At the same time, demand for cash has been on the rise as well and we can observe a particularly high level of growth demand for banknotes during crisis times. The increase in demand for cash known as the “banknote paradox” is a phenomenon observed in many economies. It results from the existence of two streams of demand for cash - transactional and precautionary, and the differences in the directions of their changes from the point of view of the central bank and other entities involved in cash transactions, since it enables the optimization of cash supply management, which allows, on the one hand, to reduce the costs of cash processing and, on the other hand, to improve the effectiveness of monetary policy. This paper estimates the share of the transaction demand for cash with the aggregate demand. The strength and direction of the impact of selected macroeconomic and behavioural factors (uncertainty caused by the Global Financial Crisis and the Pandemic Crisis) on transaction and precautionary demand for cash were also assessed. A novel approach to the problem of demand for cash is based on considering the impact of macroeconomic shocks in the form of crises on the demand for cash.

Demand for Cash and its Determinants - a Post-Crisis Approach<sup>1</sup>

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution 4.0 International License.

Demand for Cash and its Determinants - a Post-Crisis Approach

The use of cashless payment instruments has been on an increase over many years now. At the same time, demand for cash has been on the rise as well and we can...

Demand for Cash and its Determinants - a Post-Crisis Approach¹

Published Online: May 24, 2023

Page range: 103 - 131

Received: Feb 25, 2022

Accepted: Oct 27, 2022

DOI: https://doi.org/10.2478/jcbtp-2023-0016

Keywords
demand for cash, supply of cash, central bank, crisis

© 2023 Ilona Skibińska-Fabrowska, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Demand for Cash and its Determinants - a Post-Crisis Approach1

Published Online: May 24, 2023

Page range: 103 - 131

Received: Feb 25, 2022

Accepted: Oct 27, 2022

DOI: https://doi.org/10.2478/jcbtp-2023-0016

Keywordsdemand for cash, supply of cash, central bank, crisis

© 2023 Ilona Skibińska-Fabrowska, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Demand for Cash and its Determinants - a Post-Crisis Approach¹

Keywords
demand for cash, supply of cash, central bank, crisis