Abstract
Knowing the part of currency in circulation that is used for transactions is important information for a central bank. For several countries, the share of banknotes that is hoarded or circulates abroad is sizeable, which may be particularly relevant for large-denomination banknotes. We analyze the demand for Swiss banknotes over a period starting in 1950 to 2017 and use different methods to derive the evolution of the amount that is hoarded. Our findings indicate a sizeable amount of hoarding, in particular for large denominations. The hoarding shares increased around the break-up of the Bretton Woods system, were comparatively low in the mid-1990s, and have increased significantly since the turn of the millennium and the recent financial and economic crises.
Highlights
In many economies, demand for cash is growing despite an increasing share of electronic payments driven by continuous innovations in payment technology.1 In Switzerland, similar to some other countries, the increase in the demand for banknotes has even accelerated since the global financial crisis (Assenmacher et al 2018, see Fig. 4)
Our findings indicate a sizeable amount of hoarding, in particular for the two largest denominations, the Swiss franc (CHF) 1000 and the CHF 200 banknote
The hoarding share generally increased around the breakup of the Bretton Woods system, was comparatively low in the mid-1990s, and has increased significantly since the turn of the millennium and the recent financial and euro area crises
Summary
Demand for cash is growing despite an increasing share of electronic payments driven by continuous innovations in payment technology.1 In Switzerland, similar to some other countries, the increase in the demand for banknotes has even accelerated since the global financial crisis (Assenmacher et al 2018, see Fig. 4). Otani and Suzuki (2008) propose a simple method to estimate the share of banknotes not used for transactions based on the assumption that different denominations are utilized in similar proportions over time to effect payments.
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