Programme

The Demand for Cash in Turbulent Times: A Global Update

by Antti Heinonen

The paradoxical development of the two motives to use cash – the decline in its usage in payments accompanied by the growth of its holdings – has been evident for a number of years. However, this trend accelerated during the Covid-19 pandemic because of increasing use of online shopping and contactless and mobile payments. At the same time the precautionary demand for cash grew, as is typical in times of uncertainty, and the use of cash as a store of value reached record growth rates.
When the pandemic eased its grip towards the end of 2021, a kind of return to a new normal was visible in cash demand. However, the events since then showed this to be only temporary. Not only has the pandemic disrupted global supply chains, but the Russian invasion to Ukraine has created further uncertainty as well as an inflation of food and energy prices. Even if these events created new uncertainties, and further justified the precautionary demand for cash, its opportunity cost rose significantly as a result of the growing interest rates in 2022. The decreasing real income of citizens was evidently another good reason to give up cash savings and use them for consumption. Furthermore, the motivation of banks to keep cash in their vaults rather than deposit at the central bank disappeared at the same pace as the negative and minimal interest rates.
The presentation will focus on the development of banknote circulation during the major global turbulences since the millennium. Addressing the development also in volume terms, will shed further light on the store of value function of cash.
The two motives of cash usage going in opposite directions have raised questions about how to ensure the resilience of the cash infrastructure, and the access to and acceptance of cash. The development has also intensified discussion about central bank digital currency (CBDC) as a complementary form of public money. The presentation will conclude with observations regarding why the development of the cash infrastructure is as important as that of the CBDC from the point of view of the issuance of public money.

Antti Heinonen

Antti Heinonen was the chairman of the Banknote Ethics Initiative from 2013 until 2023. Before that he was the chairman of the Central Bank Counterfeit Deterrence Group, between 2008 and 2012 and the Director, Banknotes at the ECB from 1998 until 2008. Prior to joining the ECB, he was the chief cashier for the Bank of Finland. He holds degrees in economics and mathematics from the University of Helsinki. He has written several books on banknotes and their history, and updates regularly the global demand for banknotes and contributes to the discussion on the future of cash.

Factors Determining the Cash Demand Patterns in the Eurozone and Hungary

by Ildikó Ritzl-Kazimir

The role of cash and the structure of its demand have been constantly changing over the past two decades. In addition to traditional factors such as the interest rates, income, price level, wealth, the institutional environ-ment also has a significant and lasting effect on this change. As a result of the change in the institutional envi-ronment, a relative decrease in the transactional demand for cash and, in parallel, an increasingly decisive precautionary demand for cash can be observed in the Eurozone and in Hungary as well. According to that the drivers of cash demand has changed during the last two decade; the transactional factor became even less important and parallel with that the uncertainty play even more important role. In our paper the cash demand generated by social, economic, political or any other uncertainty is called precautionary demand. The sudden increase in uncertainty causes structural breaks in the development of precautionary demand for cash. The presentation shows the two decades of precautionary demand in the Eurozone and Hungary through the de-velopment of the euro and forint cash holding ratio and the factors that significantly affect it. The trend of cash holding ratios is increasing and characterized by structural breaks, the most significant breakpoints were formed during the 2008 global economic crisis and the 2020 closures due to COVID-19. The closures necessi-tated by new waves of the pandemic, the geopolitical uncertainty caused by the Russian-Ukrainian war, and the emerging economic crisis exposed the cash holding ratio to more and more shocks. Because of this, the precautionary demand for cash lost its previous trend, and its development became difficult to forecast. De-mand shocks arising because of the above processes can probably be expected in the future as well, which may necessitate the development of different stockpiling and regulation practices by central banks.

Ildikó Ritzl-Kazimir

Ildiko Ritzl-Kazimir is senior cash policy expert of Directorate Cash Logistics at Magyar Nemzeti Bank, the central bank of Hungary. She received her PhD degree at Corvinus University of Budapest, her research topic was VAT fraud estimation. Before joining to the central bank of Hungary, she worked for Budapest Business School, Budapest University of Technology as an assistant professor of economics and for Hungarian Central Statistical Office as a senior expert of National Accounts. Currently her main responsibilities are the active participation in the preparation and development of strategic decisions related to cash supply and contribution to research of Directorate as the survey-based payment behaviour research, the analyses and econometric modelling of cash demand.

Usage and Perception of Cash in France

by Marc Schwartz

Despite predictions that the coronavirus pandemic would bring the death of cash, the opposite occurred. Cash in circulation increased sharply in 2020 and 2021, both in the Euro area and in the United States. The demand for cash has slowed down since mid-2022, but cash as % of GDP is still on an upward trend in most developed and emerging countries.

Cash as a means of payment is losing ground to cards but remains the most frequently used payment method at the point of sale in the euro area and in France, according to the 2022 ECB survey on cash usage. Demand for cash is now driven by store-of-value motives. In times of crisis, cash plays a stabilizing role for the economy since trust in physical money remains strong.

According to a yearly survey conducted for Monnaie de Paris, attachment to cash in France is strengthening and there is a clear rejection of a cashless world. Cash proves to be a reassuring means of payment, especially in view of current inflation. Coins are part of this story: the level of concern regarding a possible withdrawal of 1 & 2 cents coins is growing. Despite being increasingly drawn to new digital means of payment, French people are not convinced by the digital euro project.

Marc Schwartz

Marc Schwartz, born in 1963 in Paris, is Chairman and Chief Executive Officer of La Monnaie de Paris (National French Mint). He was appointed by decree of the French President, Emmanuel Macron, in November 2018.
He is also Senior Counsellor at the Cour des Comptes (French Court of Audit) and a lecturer in media and cultural industries economics at Sciences Po Paris.

Marc Schwartz started his carrer as an Auditor at the Cour des Comptes in 1988 and joined the Treasury Department in 1992 before his appointment as Economic and financial Counsellor for South-East Asia at the French Embassy in Singapore in 1994. He was advisor to the Minister of Economy, Finance and Industry and the Secretary of State for the Budget from 1997 to 2000.
He then joined France Télévisions, as Chief Financial Officer before being promoted to Deputy Chief Executive Officer. In 2010, he became a partner withing the audit and consulting firm Mazars, in charge of Public Sector and Media. He returned to the Cour des Comptes in 2014 and has carried out numerous official missions. From May 2017 to January 2018, he was Chief of Staff to the Minister of Culture, Françoise Nyssen.

He holds a bachelor’s degree in Economics and Public finance (Sciences Po Paris) and a master’s degree in Corporate finance. He also graduated from Ecole Nationale d’Administration the French School for Public administration.