This paper compares digital and physical currency, focusing on a single intrinsic difference: digital, unlike physical currency, allows the monetary authority to trace the monetary flows in and out of the accounts. We show that this technological advance in recordkeeping can be used by the monetary authority to improve upon physical currency and achieve efficiency in a wide range of circumstances.
Amendola, N., Araujo, L., Ferraris, L. (2026). Physical versus digital currency A difference that makes a difference. THEORETICAL ECONOMICS, 21(3), 691-715 [10.3982/te6479].
Physical versus digital currency A difference that makes a difference
Ferraris, Leo
2026
Abstract
This paper compares digital and physical currency, focusing on a single intrinsic difference: digital, unlike physical currency, allows the monetary authority to trace the monetary flows in and out of the accounts. We show that this technological advance in recordkeeping can be used by the monetary authority to improve upon physical currency and achieve efficiency in a wide range of circumstances.
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