Coronavirus did not “kill” cash. On the contrary, he provoked in the Czechs such a search for “cash” as has not been here for almost twelve years


At the height of the coronavirus crisis, many warned that the virus could “kill” cash. Dthe question of her hygiene came to the fore. For example, the human flu virus survives on banknotes for up to 17 days and remains infectious throughout. Therefore, many people feared that coronavirus, which is highly contagious, could be infected by manipulating physical money.

The US Federal Reserve even quarantined physical dollars, which it withdrew from Asia for circulation in the United States, in early March this year (see Reuters report). physical disposal of money circulating in a risky environment such as hospitals or food markets.

In the end, however, it turns out that the coronavirus, on the other hand, stimulated the search for cash among humans. This is also evident from the data from the Czech Republic. According to the latest data from the Czech National Bank, a total of CZK 639.4 billion was in domestic circulation in May. This is the most in history. Indeed, there has never been as much cash in domestic circulation in the history of the Czech Republic as it is now. However, this would not be so special, because the volume of cash in circulation has been growing quite steadily for a long time.

However, during the peak of the coronavirus crisis, this increase was particularly rapid. In April alone, the volume of domestic currency in circulation increased by 3.2 percent, the most significant in almost twelve years (see chart below). The volume of currency in circulation increased more significantly in a single month in October 2008. At that time, a month after the collapse of the investment bank Lehman Brothers, a critical phase of the global financial crisis broke out. In October 2008, the volume of domestic currency increased by a staggering ten percent, ie about three times compared to the many-year high of April this year.

Thus, at the time of the peak of the coronavirus crisis, cash proved that in the eyes of many Czechs it still represents certainty in difficult times. They prefer to have it at home “behind the picture”, in physical form, than to leave its electronic equivalent in their bank account. Although the Czechs did not really exchange cash in real terms due to the conclusion of a substantial part of the stone shops, they kept it at home to an increased extent in case of any financial or banking turmoil. The rise of non-cash or contactless payments and the dramatic increase in the intensity of online trading that occurred as a result of the coronavirus crisis did not in any way mean the end or the decline of “cash”.

Similar developments have taken place in a number of other countries, particularly in the USA, Canada, Italy, Spain, Germany, France, Australia, Brazil, Mexico, India and Russia. In the euro area, the increase in cash in circulation was mainly related to € 200 banknotes. The increase in the search for people, especially after the “fold” two-hundred-dollar bills, confirms that the demand for cash grew during the coronavirus crisis, not so much for transactional reasons as for the panic accumulation of cash for fear of financial turmoil. People simply bought less for cash than usual, but they feared cash even intensely “just in case” in fear of panic.

However, in contrast to the situation during the financial crisis twelve years ago, there has now not been a significant increase in the share of currency in circulation. Neither in the Czech Republic, as shown by CNB data (see chart below), nor in many other countries. The increase in this share is only an unmistakable sign of a more general financial panic among the population. However, this did not happen during the coronavirus crisis. Part of the population withdrew cash from the account, or did not prefer to deposit it on it, but other individuals or companies – who clearly did not panic so much – contributed to the fact that their increased deposits (increased due to the impossibility or unwillingness to spend or invest in the current conditions) largely compensated for the increase in the volume of currency in circulation. So the mentioned ratio remained without a more visible rise in the Czech Republic, in contrast to the situation at the time of the outbreak of the global financial crisis in 2008.

Lukáš Kovanda, Ph.D.

National Economic Council of the Government (NERV)

Chief Economist


Please enter your comment!
Please enter your name here