Forecasting banknote returns in a changing payments environment

David Cronin and Niall Mcinerney
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David Cronin: Advisor, Central Bank of Ireland
Niall Mcinerney: Senior Economist, Central Bank of Ireland

Journal of Payments Strategy & Systems, 2022, vol. 16, issue 2, 120-136

Abstract: This paper provides a model for forecasting cash returns to central banks. Using data from Ireland, the study identifies a recent structural shift in the relationship between banknote returns and cashbased personal consumption expenditure, likely due to the adoption of contactless payments. Projections of banknote returns are informed by three elements: forecasts of personal consumption, the cash share of that spending, and the returns ratio — that is the ratio of (the log of) banknote returns to the (log of) cash-based personal consumption. To illustrate the modelling approach, the study considers the effects of future payment instrument choices and of COVID-19 on consumption to forecast cash returns for Ireland up to 2030.

Keywords: banknote returns; contactless payments; COVID-19 (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:aza:jpss00:y:2022:v:16:i:2:p:120-136

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