The Macroeconomics of De-Cashing

IMF Working Papers, March 27, 2017

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The Macroeconomics of De-Cashing

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Bibliographic details

• Authors: Alexei P Kireyev
• Published: March 27, 2017
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781475589252.001

Overview and objective

• Author: Alexei P Kireyev
• Publication date: March 27, 2017
• Purpose: Present a simple, illustrative framework to analyze macroeconomic implications of de-cashing, defined as replacing paper currency with convertible deposits.
• Scope: Roadmap for a systematic evaluation of de-cashing across key macroeconomic sectors.

Analytical framework

• Starts from: a traditional saving-investment balance.
• Developed framework: a four-sector macroeconomic framework disaggregated into:
  • the real sector,
  • the fiscal sector,
  • the monetary sector,
  • the external sector.
• Nature of framework: purely illustrative; designed to identify potential implications in each sector.

Key findings and identified implications

• De-cashing would affect all key macroeconomic sectors.
• Overall macroeconomic impact depends on the balance of growth-enhancing and growth-constraining factors.
• Sectoral implications:
  • Real sector: potential changes in transaction patterns and monetary holdings as paper currency is replaced by convertible deposits.
  • Fiscal sector: implications for revenue administration and government cash management stemming from reduced use of paper currency.
  • Monetary sector: effects on the monetary base, bank money (transferable deposits), and interest rate dynamics as currency demand shifts.
  • External sector: potential interactions with balance of payments and current account positions through changes in currency substitution and international transaction practices.
• The paper draws a balance on possible positive and negative macroeconomic implications of de-cashing.

Policy recommendations and objectives

• Proposes policies capable of:
  • augmenting the economic and social benefits of de-cashing,
  • reducing potential costs associated with de-cashing.
• Emphasis: design policies that influence the balance between growth-enhancing and growth-constraining factors.

Subject areas and keywords (as listed)

• Subject: Balance of payments, Banking, Currencies, Current account, Digital currencies, Monetary base, Money, Revenue administration, Technology
• Keywords: balance of payments, bank money, cash, cash transaction, Currencies, currency, currency demand, Current account, demonetization, Digital currencies, eliminated currency printing, Global, interest rate, Monetary base, monetary value, surrogate currency, transferable deposit, unit of account, WP

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• The Macroeconomics of De-Cashing
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