Breaking the Curse of Cash

Hendrickson, Joshua R.; Park, Jaevin

doi:10.2139/ssrn.3160989

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Cited by 3 publications

(2 citation statements)

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“…Zhang (2014) studies international currency competition by considering the role of seigniorage. Hendrickson and Park (2018) show that dual currencies can be useful to improve welfare by making an implicit transfer from one type of MOE user to another. We extend their model to analyze the effect of seigniorage transfers but focus on the role of record-keeping money on tax evasion incentives along with CBI.…”

Section: Related Literaturementioning

confidence: 97%

Central Bank Digital Currency, Tax Evasion, Inflation Tax, and Central Bank Independence

2020

Self Cite

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Section: Related Literaturementioning

confidence: 97%

Central Bank Digital Currency, Tax Evasion, Inflation Tax, and Central Bank Independence

2020

Self Cite

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“…Zhang (2014) studies international currency competition by considering the role of seigniorage. Hendrickson and Park (2018) show that dual currencies can be useful in improving welfare by making an implicit transfer from one type of MOE user to another. We extend their model to analyze the effect of seigniorage transfers, but focus on the role of record‐keeping money on tax evasion incentives, along with the remittance constraint on the central bank.…”

Section: Introductionmentioning

confidence: 99%

Central bank digital currency, tax evasion, and inflation tax

2022

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Can introducing a central bank digital currency (CBDC) improve social welfare? We construct a dual currency model to study whether CBDC with a record-keeping technology can reduce tax evasion incentives in cash transactions and further achieve better allocations than a cash-only economy with respect to fiscal arithmetic. We show that when there is inefficiency associated with tax evasion in cash transactions, introducing CBDC with strictly positive interest can remove the inefficiency and thus improve welfare by discouraging tax evasion and rewarding tax payments. This beneficial effect of the CBDC depends on the central bank's fiscal role.

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