Abstract
Generally speaking, all euro-area national central banks issue euro banknotes. Following the introduction of euro cash at the start of 2002, the cumulated net issuance of euro notes by the Deutsche Bundesbank (“German” euro notes) increased from an initial €73 billion to €508 billion at the end of 2014. Figure 4.1 shows that the volume of these German euro banknotes outstanding has grown very much faster than could have been expected on the basis of earlier growth rates of D-Mark currency. For the first two years after the launch of euro cash, this strong growth could be explained by the need to replenish stocks of hoarded banknotes both inside and outside the euro area after the currency changeover. However, this should have ceased to have an effect at the end of 2003 when the volume of German banknotes outstanding returned to the hypothetical level that would have been reached had euro cash not been introduced. Nevertheless, the pace of growth in the volume of banknotes outstanding continued to be much more dynamic than in the D-Mark era in the 1990s. As shown in Bartzsch et al. (2011a), this huge surge is due to foreign demand for euro banknotes. They find that, at the end of 2009, around 70% of the cumulated net issuance was held outside Germany.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Bibliography
Akinci, Ö. (2003), Modeling the demand for currency issued in Turkey, Central Bank Review, 3, pp. 1–25.
Alvarez, F.E. & F. Lippi (2007), Financial innovation and the transactions demand for cash, CEPR Discussion Paper 6472.
Amromin, G. & S. Chakravorti (2009), Whither loose change? The diminishing demand for small denomination currency, Journal of Money, Credit and Banking, 41, pp. 315–335.
Andrews, D.W.K. & E. Zivot (1992), Further evidence on the great crash, the oil price shock and the unit root hypothesis, Journal of Business and Economic Statistics, 10, pp. 251–270.
Bartzsch, N., G. Rösl & F. Seitz (2011a), Foreign demand for euro banknotes issued in Germany: Estimation using indirect approaches, Deutsche Bundesbank Discussion Paper, Series 1, 21/2011.
Bartzsch, N., G. Rösl & F. Seitz (2011b), Foreign demand for euro banknotes issued in Germany: Estimation using direct approaches, Deutsche Bundesbank Discussion Paper, Series 1, 20/2011.
Bartzsch, N., R. Setzer & F. Seitz (2015), The demand for euro banknotes issued in Germany: Structural modelling and forecasting, MPRA Paper No. 64949, June.
Baumol, W.J. (1952), The transactions demand for cash: An inventory theoretic approach, Quarterly Journal of Economics, 66, pp. 545–556.
Boeschoten, W.C. (1992), Currency use and payments patterns, Kluwer Academic Publishers, Dordrecht.
Briglevics, T. & S. Schuh (2014), U.S. consumer demand for cash in the era of low interest rates and electronic payments, ECB Working Paper 1660.
Cheung, Y.-W. & K.S. Lai (1993), Finite-sample sizes of Johansen’s likelihood ratio tests for cointegration, Oxford Bulletin of Economics and Statistics, 55, pp. 313–328.
Cusbert, T. & T. Rohling (2013), Currency demand during the global financial crisis: Evidence from Australia, Reserve Bank of Australia, Research Discussion Paper 2013–01.
Deutsche Bundesbank (1997), Estimating the term structure of interest rates, Monthly Report, October, pp. 61–66.
Deutsche Bundesbank (2009), The development and determinants of euro currency in circulation in Germany, Monthly Report, June, pp. 45–58.
Deutsche Bundesbank (2012), Innovations in payment systems, Monthly Report, September, pp. 47–60.
Deutsche Bundesbank (2015), Payment behaviour in Germany in 2014 — Third study of the utilisation of cash and cashless payment instruments, Frankfurt am Main, Germany.
Doyle, B.M. (2000), ‘Here, Dollars, Dollars …’ — Estimating currency demand and worldwide currency substitution, Board of Governors of the Federal Reserve System, International Finance Discussion Papers 657.
European Central Bank (ECB) (2014), The international role of the euro, July, Frankfurt am Main, Germany.
Fischer, B., P. Köhler & F. Seitz (2004), The demand for euro area currencies: Past, present and future, ECB Working Paper 330.
Friedman, M. (1977), Time perspective in demand for money, Scandinavian Journal of Economics, 79, pp. 397–416.
Friedman, M. & A.J. Schwartz (1982), The effect of the term structure of interest rates on the demand for money in the United States, Journal of Political Economy, 90(1), pp. 201–212.
Johansen, S. (1995), Likelihood-based inference in cointegrated vector autoregressive models, Oxford University Press, Oxford and New York.
Johansen, S. (2000), Modelling of cointegration in the vector autoregressive model, Economic Modelling, 17, pp. 359–373.
Khamis, M. & A. Leone (2001), Can currency demand be stable under a financial crisis? The case of Mexico, IMF Staff Papers 48, pp. 344–366.
MacKinnon, J.G. (1991), Critical values for cointegration tests, in Engle, R.F. and C.W.J. Granger (eds), Long-run economic relationships: Readings in cointegration, Oxford University Press, New York, pp. 267–277.
MacKinnon, J.G. (1996), Numerical distribution functions for unit root and cointegration tests, Journal of Applied Econometrics, 11, pp. 601–618.
MacKinnon, J.G., A.A. Haug & L. Michelis (1999), Numerical distribution functions of Likelihood Ratio tests for cointegration, Journal of Applied Econometrics, 14, pp. 563–577.
Nachane D.M., A.B. Chakraborty, A.K. Mitra & S. Bordoloi (2013), Modelling currency demand in India: An empirical study, Reserve Bank of India Discussion Paper 39.
PaySys (2015), ECB card payment statistics: The missing 792 billions Euro, PaySys Report 02/2015, April, pp. 5–9.
Rao, B.B. (2007), Estimating short and long-run relationships: A guide for the applied economist, Applied Economics, 39, pp. 1613–1625.
Reimers, H.-E. (1992), Comparisons of tests for multivariate cointegration, Statistical Papers, 33, pp. 335–359.
Saikkonen, P. (1992), Estimation and Testing of Cointegrated Systems by an Autoregressive Approximation, Econometric Theory, 8, pp. 1–27.
Schneider, F. (2002), The size and development of the shadow economies of 22 transition and 21 OECD countries, IZA Discussion Paper 514.
Seitz, F. (1995), The circulation of Deutsche Mark abroad, Discussion Paper 1/95, Economic Research Group of the Deutsche Bundesbank.
Seitz, F. (1998), Geldnachfrage, Zinsen und Zinsstruktur (“Money demand, interest rates and the term structure”), Konjunkturpolitik — Applied Economics Quarterly, 44, pp. 256–286.
Seitz, F. & R. Setzer (2009), The demand for German banknotes: Structural modelling and forecasting, Discussion Paper, mimeo.
Snellman, J. & J. Vesala (1999), Forecasting the electronification of payments with learning curves: The case of Finland, Bank of Finland Discussion Paper 8/99.
Snellman, J., J. Vesala & D. Humphrey (2000), Substitution of noncash payment instruments for cash in Europe, Bank of Finland Discussion Paper 1/2000.
Stock, J.H. and M. Watson (1993), A Simple Estimator Of Cointegrating Vectors In Higher Order Integrated Systems, Econometrica, 61, pp. 783–820.
Tobin, J. (1956), The interest-elasticity of transactions demand for cash, Review of Economics and Statistics, 38, pp. 241–247.
Editor information
Editors and Affiliations
Copyright information
© 2016 Nikolaus Bartzsch and Franz Seitz
About this chapter
Cite this chapter
Bartzsch, N., Seitz, F. (2016). Cash Holdings in Germany and the Demand for “German” Banknotes: What Role Is There for Cashless Payments?. In: Górka, J. (eds) Transforming Payment Systems in Europe. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, London. https://doi.org/10.1057/9781137541215_4
Download citation
DOI: https://doi.org/10.1057/9781137541215_4
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-71251-9
Online ISBN: 978-1-137-54121-5
eBook Packages: Economics and FinanceEconomics and Finance (R0)