Forecasting Euro Banknotes in Circulation with Structural Time Series Models in Times of the COVID-19 Pandemic

Nikolaus Bartzsch, Marco Brandi, Lucas Devigne, Raymond De Pastor, Gianluca Maddaloni, Diana Posada Restrepo and Gabriele Sene

Working papers from Banque de France

Abstract: As part of the Eurosystem s annual banknote production planning, the national central banks draw up forecasts estimating the volumes of national-issued banknotes in circulation for the three years ahead. As at the end of 2021, more than 80 per cent of euro banknotes in circulation (cumulated net issuance) had been issued by the national central banks of France, Germany, Italy and Spain (collectively referred to as the 4 NCBs ). To date, the 4 NCBs have been using ARIMAX models to forecast the banknotes issued nationally in circulation by denomination ( benchmark models ). This paper presents the structural time series models developed by the 4 NCBs as an additional forecasting tool. According to the forecast accuracy measures employed, the Structural Time series Models ( STSMs ) outperform the benchmark models at each of the 4 NCBs and for most of the denominations. However, it should be borne in mind that the statistical informative value of this comparison is limited by the short projection period of just 12 months.

Keywords: Euro; Demand for Banknotes; Forecast of Banknotes in Circulation; Structural Time Series Models; ARIMA Models; Intervention Variables (search for similar items in EconPapers)
JEL-codes: C22 E41 E47 E51 (search for similar items in EconPapers)
Pages: 81 pages
Date: 2023
New Economics Papers: this item is included in nep-for and nep-inv
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:919

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