Acta Oeconomica Pragensia 2017, 25(1):22-35 | DOI: 10.18267/j.aop.566

Cash in the Czech Republic: Trend Analysis 2003-2015

Zbyněk Revenda
Vysoká škola ekonomická v Praze, Fakulta financí a účetnictví (zbynek.revenda@vse.cz).

Electronization of banking services is a strong reason for relative growth of cashless payments. The importance of cash, i.e., banknotes and coins, for realizing transactions should decrease. An analysis for the Czech Republic in the period 2003-2015 confirms this. Demand of nonbank entities for cash is associated mainly with liquidity, banks' credibility and technological sophistication. Illegal transactions also form part of the demand. Zero return on cash counteracts demand, but it has little meaning with the decline in interest rates on bank deposits. The total stock of cash in the analyzed period rises, but its relative importance declines. Demand deposits are also liquid assets of households and enterprises. Cash compared with demand deposits clearly confirms the declining importance. Its share was the highest in 2004, at 30%. It fell to less than 18% in 2015. We found a similar tendency in the comparison of cash with other variables. Barring unforeseen circumstances such as complete collapse of computer networks or severe banking crisis, the author assumes that the relative importance of cash must decline in the long term. Some theoretical aspects of cash and cashless money are also discussed.

Keywords: bank reserves, central bank, cash, demand deposits, demand for money, monetary base, monetary aggregates, monetary policy
JEL classification: E4, E5

Published: February 1, 2017  Show citation

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Revenda, Z. (2017). Cash in the Czech Republic: Trend Analysis 2003-2015. Acta Oeconomica Pragensia, 25(1), 22-35. doi: 10.18267/j.aop.566
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