The effects of negative interest rates on cash usage: Evidence for EU countries

Changes in interest rates below the zero lower bound could have potential effects on the payments market by making cash more attractive for consumers as a medium of payment and wealth storage. This paper studies how cash usage has been affected by the recent introduction of negative interest rates in European countries. Using a difference-in-differences methodology over the period 2006 - 2018, results show an increase in cash usage in negative interest-rate environments. We also find that the increase in cash usage was less pronounced in countries with superior monitoring capacity of banks (i.e. high levels of financial intermediation).