Economics, Econometrics and Finance
8 years ago

Cash transactions decline could lead to accelerating inflation, impacting monetary policy.

Journal of Monetary Economics
The evolution of cash transactions: Some implications for monetary policy
Stacey L. Schreft, Bruce D. Smith

Paper Summary

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The article discusses how changes in the demand for cash can affect monetary policy. Different policy approaches can lead to varying outcomes, such as accelerating inflation or falling interest rates. Maintaining a fixed composition of government liabilities may be advantageous under certain conditions, while interest rate or inflation targeting can be more stable in uncertain environments. The study shows that the way monetary policy is conducted can have significant impacts on the economy.