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Munich Personal RePEc Archive

Cash and Negative Interest Rates

Berentsen, Aleksander and Schär, Fabian (2016): Cash and Negative Interest Rates. Published in:

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Abstract

Cash is accused of three sins: First, cash is inefficient and costly to use, and society would be better off without it. Second, it promotes crime, and facilitates money laundering and tax evasion. Third, it makes negative nominal interest rates infeasible. In certain situations, this may hinder central banks from implementing optimal monetary policies. In this article, we argue that all three accusations are fallacies; they are based on faulty reasoning. There is absolutely no need to limit the use of cash. On the contrary, societies should facilitate its use.

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