Modelling banknote printing costs: of cohorts, generations, and note-years

Leo Van Hove

Economic Modelling, 2015, vol. 46, issue C, 238-249

Abstract: Menzies (2004) uses a ‘cohorts approach’ to model banknote printing costs. This paper proposes a ‘generational approach’ that allows for more realistic assumptions concerning currency growth and note replacement. The paper shows that Menzies' claim that the case for polymer banknotes becomes stronger with higher currency demand is an artefact of his model. In most scenarios, the number of notes in circulation does not affect the relative cost effectiveness of paper and polymer; and when it does, the impact goes in the other direction. A second finding is that the ‘note life over unit-cost rule of thumb’ can be misleading.

Keywords: Banknotes; Currency; Central banks; Printing costs; Polymer (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:46:y:2015:i:c:p:238-249

DOI: 10.1016/j.econmod.2014.12.006

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