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Restricting or Abolishing Cash: An Effective Instrument for Eliminating the Shadow Economy, Corruption and Terrorism?

Author(s): Friedrich Schneider

Date published: Aug 2019

SUERF Policy Note, Issue No 90
by Friedrich Schneider, Johannes Kepler University

 

JEL-codes: C80, C82, H56, K42, O17, Y1.
Keywords: Cash, cash limit, shadow economy, crime, corruption, financial proceeds, money laundering, trans-national crime organizations, cyber crime.


In recent years, intensive discussion has arisen about restricting or even abolishing the use of cash. I am aware that there is a much longer and more extensive debate about the costs and benefits of phasing out paper currency, which is the title of a paper of Rogoff (2014). But what is new, all of a sudden, is the suggestion that the restriction or even abolition of cash would more or less do miracles: If cash were to be severely restricted or no longer existed, there would be much less crime and the shadow economy would be drastically reduced, because most shadow economy transactions are usually undertaken in cash. In addition, if cash were not easily available, terrorist attacks would be severely hampered. This short note tries to shed some light on whether cash has such an important influence on the shadow economy, crime and terrorism, but also on the effect, which reduced cash would have on civil liberties.

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SUERF Policy Note, Issue No 90SUERF Policy Note, Issue No 90

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