Costs and Benefits to Phasing Out Paper Currency

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Costs and Benefits to Phasing Out Paper Currency

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Title: Costs and Benefits to Phasing Out Paper Currency
Author: Rogoff, Kenneth S.
Citation: Rogoff, Kenneth S. 2014. Costs and Benefits to Phasing Out Paper Currency. In Volume 29 of NBER Macroeconomics Annual 2014, ed. Jonathan Parker and Michael Woodford. Chicago: University of Chicago Press.
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Abstract: Despite advances in transactions technologies, paper currency still constitutes a notable percentage of the money supply in most countries. For example, it constitutes roughly 10% of the US Federal Reserve’s main monetary aggregate, M2. Yet, it has important drawbacks. First, it can help facilitate activity in the underground (tax-evading) and illegal economy. Second, its existence creates the artifact of the zero bound on the nominal interest rate. On the other hand, the enduring popularity of paper currency generates many benefits, including substantial seigniorage revenue. This paper explores some of the issues associated with phasing out paper currency, especially large-denomination notes.
Published Version: doi:10.3386/w20126
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Terms of Use: This article is made available under the terms and conditions applicable to Open Access Policy Articles, as set forth at
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