@unpublished{RoeslSeitz, author = {R{\"o}sl, Gerhard and Seitz, Franz}, title = {On the Stabilizing Role of Cash for Societies}, address = {Frankfurt am Main}, organization = {Institute for Monetary and Financial Stability, Goethe University Frankfurt}, pages = {54}, abstract = {In this paper, we focus on the stabilizing role of cash from a society-wide perspective. Starting with conceptual remarks on the importance of money for the economy in general, special attention is paid to the unique characteristics of cash. As these become apparent especially during crisis periods, a comparison of the Great Depression (1929 - 1933) and the Great Recession 2008/09 shows the devastating effects of a severe monetary contraction and how a fully elastic provision of cash can help to avoid such a situation. We find interesting similarities to both crises in two separate case studies, one on the demonetization in India 2016 and the other on cash supply during various crises in Greece since 2008. The paper concludes that supply-driven cash withdrawals from circulation (either by demonetization or by capital controls) destabilize the economy if electronic payment substitutes are not instantly available. However, as there is no perfect substitute for cash due to its unique properties, from the viewpoint of the society as a whole an efficient payment mix necessarily includes cash: It helps to stabilize the economy not only in times of crises in general, no matter which government is in place. Consequently, it should be the undisputed task of central banks to ensure that cash remains in circulation in normal times and is provided in a fully elastic way in times of crisis.}, language = {en} } @article{RoeslSeitz, author = {R{\"o}sl, Gerhard and Seitz, Franz}, title = {Cash demand in times of crisis}, series = {Journal of Payments Strategy and Systems}, volume = {16}, journal = {Journal of Payments Strategy and Systems}, number = {2}, publisher = {Ingenta}, address = {Oxford}, issn = {1750-1814}, pages = {107 -- 119}, abstract = {This paper focuses on the role of specific types of crisis (technological crisis, financial market crisis, natural disaster) and their effects on the demand for cash in an international context. As evidence from the last 30 years shows, demand for cash increases during periods of crisis, regardless of the nature of the crisis. The nature of the crisis does, however, determine whether small or large banknote denominations are affected more. This study finds that times of payment uncertainties are associated with increased demand for small denominations, probably reflecting an elevated demand for transaction balances. By contrast, in times of financial crisis or general economic uncertainty, the increased demand for cash is largely the result of consumers taking precautionary actions and building up non-transaction balances; for this reason, there is greater demand for large banknote denominations. This study finds that cash continues to play an important role in crisis management. Whether this function can also be fulfilled by a future central bank digital currency, however, remains to be seen.}, language = {en} } @article{RoeslSeitz, author = {R{\"o}sl, Gerhard and Seitz, Franz}, title = {Central Bank Digital Currency and Cash in the Euro Area: Current Developments and one Specific Proposal}, series = {Credit and Capital Markets - Kredit und Kapital}, volume = {55}, journal = {Credit and Capital Markets - Kredit und Kapital}, number = {4}, publisher = {Duncker \& Humblot}, address = {Berlin}, doi = {10.3790/ccm.55.4.523}, pages = {523 -- 551}, abstract = {The present paper provides an overview on current developments of cash usage and issue of central bank digital currency (CBDC) in the euro area and proposes a possible design of a digital euro that allows for instant offline payments. Cash usage at the point-of-sale decreased perceptibly in the past years mainly due to the ongoing trend towards digitalization. However, we show that there are also indications that consumers were somewhat pushed into cashless payments by government regulations and supply-side restrictions by commercial banks. Nonetheless, overall demand for euro cash remained strong and even increased relative to GDP since the financial crisis in 2008. In this process, however, we observe a supply-driven shift towards lower banknote denominations. Central banks all over the world are intensively thinking about the potential issue of ­CBDC as a substitute or complement to cash. Based on some of its preferred characteristics, we propose a double pre-paid scheme combining central elements of TARGET Instant Payment Settlement and electronic money features enabling offline and online instant payments. Since anonymity is categorically discarded by the ECB and as cash has some special advantages from a consumer perspective, the digital euro will rather co-circulate with cash than replace it in transactions.}, language = {en} }