Pandemics, Cashless Economies, and Negative Interest Rates

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One indirect consequence of COVID-19 is to add to pressure for a ban on cash. That could create the potential for central banks to adopt deeply negative interest rates.

NRPLUS MEMBER ARTICLE I n the face of the pandemic shutdowns, many have been speculating about the direct consequences(whether we will see recession with inflation or recession with deflation) and debating what the appropriate economic-policy response is. Meanwhile, a subtle shift in the discussion is under way. It could have dramatic long-term consequences for monetary policy, as some take the opportunity presented by the pandemic to renew their arguments for considering the elimination of cash (or something close to it). Many retailers, vendors that transact in cash, such as restaurants, and even Las Vegas casinos are now considering or have already eliminated the use of paper currency

Jon Hartley is a master’s student at the Harvard Kennedy School and a visiting fellow at the Foundation for Research on Equal Opportunity. He formerly served as a senior policy adviser to the Congressional Joint Economic Committee.


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