• Kenneth Rogoff


February 11, 2021, Paper: "The advent of the Covid-19 pandemic has witnessed a strong uptick in paper currency demand across advanced economies, even as contactless methods surged ahead of cash in payments. This article explores these two contrasting phenomena, which are in fact continuations of much longer-term trends. The use of cash, while still important for small in-person transactions, has been declining as a share of overall consumer payments for decades, thanks to a steady stream of innovations including credit cards, debit cards, electronic transfers, and smartphone payment apps. For example, in the United States, paper currency accounted for 26 percent of the number of consumer payments in 2019, but only 6 percent in value terms, down from 40 percent and 14 percent respectively in 2012. On the other hand, U.S. dollars in circulation have increased from $1.1 trillion in January of 2012 to $1.8 trillion in January 2020, exploding to $2.1 trillion in December 2020. The same pattern remains if one excludes foreign holdings (50–60 percent of the total) and is found in most other advanced economies as well. Some argue that soaring currency demand contests the view that the world is headed to cashless future, or even a “less-cash” society (see, e.g., BIS 2019)."

Non-HKS Author Website - Kenneth Rogoff