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Trends and developments in the use of euro cash over the past ten years

Laure Lalouette and Henk Esselink

Economic Bulletin Articles, 2018, vol. 6

Abstract: This article presents the developments in the circulation of euro banknotes and the underlying drivers of cash demand in the euro area and abroad. Cash in circulation is on the rise, both in the euro area and abroad. In addition, data from a survey on the use of cash in the euro area indicates that by volume and number of transactions cash remained the most used payment instrument in 2016. However, the growth in banknote circulation can only partially be explained by transaction demand. Most euro banknotes in circulation are used as a store of value and households and firms inside and outside of the euro area obviously value the option of storing part of their assets in central bank money. Considering the currently low opportunity costs of holding cash, the stored euro banknotes can be expected to return if interest rates were to increase. However, as shown by developments over the past ten years, the store of value function is determined not only by interest rates, but also by external events which cannot be predicted. The demand for banknotes has also been impacted by various additional factors such as the financial and sovereign debt crises, geopolitical uncertainties, exchange rate developments and policy decisions JEL Classification: D12, E41, E42

Keywords: banknote circulation; euro cash; payment behaviour; store of value (search for similar items in EconPapers)
Date: 2018-09
Note: 610969
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