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What’s in Your Wallet? The Future of Cash

By Gerst and Daniel J. Wilson


The payment landscape has changed dramatically in recent years as new technologies have been brought to market. Yet, the demand for U.S. currency—cold, hard cash—shows no sign of fading. An empirical analysis indicates that alternative payment technologies have tended to keep cash growth in check, but other factors have more than offset this. Over the next 10 years, cash volume is projected to grow 1.7 % per year. Over the past few decades, the dominant position of cash as a store of value and a means of payment has increasingly been challenged. The growth of electronic payments, especially credit cards and, more recently, debit cards, has radically changed the role of cash in the global economy. Yet, the circulation of the U.S. dollar, the world’s most widely used currency, has continued to grow without interruption. Last year, the value of U.S. currency in circulation reached nearly $1 trillion dollars. That enormous stock of cash consisted of almost 30 billion Federal Reserve notes spread to every corner of the globe. As the nation’s central bank, the Federal Reserve is responsible for maintaining a safe and efficient payment system. Cash plays a critical role in that system. As the agency that officially issues U.S. currency, the Federal Reserve has a vital interest in understanding what determines the demand for currency and where demand is likely to go in the years to come. One way to understand the demand fo

Year: 2011
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