Dirty Money: Does the Risk of Infectious Disease Lower Demand for Cash?

November 20, 2020

Preview Citation

Format: Chicago

Serhan Cevik. Dirty Money: Does the Risk of Infectious Disease Lower Demand for Cash?, (USA: International Monetary Fund, 2020) accessed October 6, 2024

Disclaimer: 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.

Summary

The coronavirus pandemic is a global crisis like no other in modern times, and there is a growing apprehension about handling potentially contaminated cash. This paper is the first empirical attempt in the literature to investigate whether the risk of infectious diseases affects demand for physical cash. Since the intensity of cash use may influence the spread of infectious diseases, this paper utilizes two-stage least squares (2SLS) methodology with instrumental variable (IV) to address omitted variable bias and account for potential endogeneity. The analysis indicates that the spread of infectious diseases lowers demand for physical cash, after controlling for macroeconomic, financial, and technological factors. While the transactional constraints imposed by the COVID-19 pandemic could become a catalyst for the use of digital technologies around the world, electronic payment methods may not be universally available in every country owing to financial and technological bottlenecks.

Subject: Communicable diseases, COVID-19, Currencies, Deposit rates, Ebola, Financial services, Health, Money

Keywords: Cash transfer, Cash use, Communicable diseases, Coronavirus pandemic, COVID-19, Currencies, Currency-in-circulation, Demand for cash, Deposit rates, Digital money, Ebola, Global, Handling cash, Infectious diseases, Infectious-disease outbreak, Payment method, Store of value, WP

Publication Details

Pages:

15
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/255
Stock No:

WPIEA2020255
ISBN:

9781513560892
ISSN:

1018-5941

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