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The Cost of Overcoming the Zero Lower-Bound: A Welfare Analysis
To broaden the operational scope of monetary policy, several authors suggest cash abolition as an appropriate means of breaking through the zero lower-bound. We argue that the welfare costs of bypassing the zero lower-bound by getting rid of cash entirely are analytically equivalent to negative interest rates on cash holdings. Using a money-in-the-utility-function model, we measure in two ways the welfare loss consumers as money holders would be forced to bear once the zero lower-bound isdoi:10.3390/economies7030067 fatcat:opirt7bkfneh7kuyx4r7yyvjx4