Foreign Demand for Euro Banknotes

Forecasting Banknote Circulation During the COVID-19 Pandemic Using Structural Time Series Models

“…The 12month growth rate of total euro banknotes in circulation kept increasing strongly up to a high 18 Correspondingly, German-issued banknotes held outside of the euro area came to €300 billion at the end of 2019. This can be contrasted with the findings of Lalouette et al (2021) according to which total foreign demand for euro banknotes amounted to between €400 billion (or 30 per cent of total euro banknotes in circulation) and €600 billion (or 50 per cent of total euro banknotes in circulation) at the end of 2019. 19 According to estimates by Zamora-Pérez (2021), given the foreign demand estimates of Lalouette et al (2021) of foreign demand, the share of domestic store of value balances in total euro banknotes in circulation amounted to between 28 per cent to 50 per cent in 2019 and the corresponding share of domestic transaction balances added up to between 20 per cent to 22 per cent.…”

“…This can be contrasted with the findings of Lalouette et al (2021) according to which total foreign demand for euro banknotes amounted to between €400 billion (or 30 per cent of total euro banknotes in circulation) and €600 billion (or 50 per cent of total euro banknotes in circulation) at the end of 2019. 19 According to estimates by Zamora-Pérez (2021), given the foreign demand estimates of Lalouette et al (2021) of foreign demand, the share of domestic store of value balances in total euro banknotes in circulation amounted to between 28 per cent to 50 per cent in 2019 and the corresponding share of domestic transaction balances added up to between 20 per cent to 22 per cent. 20 The corresponding increase in the average value of banknotes was also reflected in higher average ATM withdrawals during the lockdown.…”

“…15 Moreover, Zamora-Pérez (2021) estimates that transactional use of euro banknotes accounted for around 20 per cent of their circulation in value terms in 2019. Given the estimates of foreign demand in 2019 in Lalouette et al (2021), the remaining 80 per cent is split roughly evenly between euro area citizens' cash savings (including, at the margin, cash held by credit institutions)…”

Ensuring Adoption of Central Bank Digital Currencies – an Easy Task or a Gordian Knot?

“…This is usually attributed to increased store-of-value demand as a result of low interest rates, increased uncertainty and other factors, such as the ageing of the population. For currencies with a strong international role, a significant share of cash in circulation can also be explained by demand from abroad (Judson, 2017;Lalouette et al, 2021). Although this may change in the future, some commentators note that countries with decreasing cash in circulation in recent years, such as Sweden, might be outliers rather than front-runners in the much-announced global trend towards a less-cash society (Armelius et al, 2020).…”