Stay tuned with CashEssentials news ! - beyond payments
By subscribing, you accept our Privacy Policy.

The Great Covid Cash Surge

Categories : Cash and Crises, Cash is a contingency and fall-back solution, Cash is also a store of value
December 2, 2021
Tags : Cash demand, Covid-19, Store of value
A paper by Ashworth and Goodhart shows that the pandemic fuelled a remarkable surge in currency in circulation, with cash once again defying premature obituaries of its demise. In a major crisis people still want to retreat to the security and safety of holding bank notes, to provide reassurance.
Guillaume Lepecq

Chair, CashEssentials

This post is also available in: Spanish

In the discussion paper, The Great Covid Cash Surge – Digitalisation Hasn’t Dented Cash’s Safe Haven Role, the author Jonathan Ashworth (Fathom Consulting) and Charles Goodhart (London School of Economics) analyse the long-term evolution of cash in circulation in relation to GDP across a broad range of countries to show the remarkable surge in cash demand during the pandemic. The 2020 growth rates for selected 32 countries (Table 1) show that:

Table 1: Annual growth in currency in circulation (%Y)


Following the panic-driven demand for cash at the early stages of the pandemic, there also appears to have been a heightened store-of value or precautionary demand, which typically occurs during economic crises, geopolitical events and major periods of uncertainty. This is evidenced by the sharp increase in high denomination notes in circulation. However, a new factor also impacted demand and is specific to the pandemic: a significant reduction in the value of notes returned to the central banks during the pandemic.

Ashworth and Goodhart conclude that “The somewhat enforced intensificiation of the digitalisation of economies clearly appears to have further diminished cash’s role as a medium of exchange. However, other important aspects of digitalisation, such as the growth in private digital currencies, haven’t weakened cash’s role as a store of value. The recent experience shows, outside of a couple of relatively small Nordic countries, that in a major crisis people still want to retreat to the security and safety of holding bank notes, especially large denomination notes, to provide reassurance. When in trouble, people want to go back to the tried and true; in this respect holding paper money in their wallets.”

This post is also available in: Spanish