The use of euro cash as a store of value in CESEE

Marc Bittner () and Thomas Scheiber ()
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Marc Bittner: Oesterreichische Nationalbank
Thomas Scheiber: Oesterreichische Nationalbank, Foreign Research Division, http://www.oenb.at

Monetary Policy & the Economy, 2022, issue Q1-Q2/22, 121-143

Abstract: People in Central, Eastern and Southeastern Europe (CESEE) have been using euro cash as a store of value ever since euro banknotes and coins were introduced in 2002. At that time, the euro replaced Austrian schilling, Deutsche mark and US dollar banknotes as a safe asset. To arrive at descriptive results for the use of euro cash in CESEE over the past 20 years, we drew on time series from the OeNB Foreign Currency Survey (1997–2007) and the OeNB Euro Survey (2007–2021). For one thing, we sum up the literature on euroization in CESEE. For another, we update and discuss key indicators of euro cash holdings in the region published in former studies that used OeNB survey data. Holding euro cash as a store of value is still widespread in Albania, Croatia, North Macedonia and Serbia. Survey respondents in Croatia, Romania and Serbia reported the highest median amounts of euro cash. Overall, the relative share of euro cash in total currency in circulation has been on a downtrend in all CESEE countries since 2007–08. However, on the level of individual portfolios, euro cash still plays an important role, in particular for the relatively large group of individuals with small savings in Southeastern Europe. Even among the relatively small group of banked savers in Croatia, Hungary, Albania, Bosnia and Herzegovina and Serbia, around 40% reported holding more than half of their total savings as cash in 2020–21. Many people in CESEE still prefer to save in cash and in euro. This suggests that the determinants of the demand for euro cash as identified by Stix (2013) and Brown and Stix (2015) are still relevant: a lack of credibility in the long-term stability of the local currency, network effects and a lack of trust in the stability of the banking system. We therefore assume that, also in the foreseeable future, euro cash will continue to play a role as a safe haven asset in CESEE.

Keywords: euroization; asset and currency substitution; survey data; CESEE (search for similar items in EconPapers)
JEL-codes: D14 E41 O16 (search for similar items in EconPapers)
Date: 2022
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