Forecasting Demand for Denominations of Chilean Coins and Banknotes
Camila Figueroa and
Michael Pedersen ()
Working Papers Central Bank of Chile from Central Bank of Chile
Monetary authorities have to plan how many units of coins and bank notes they need to buy / produce to meet the needs of the economy. With data from the Central Bank of Chile, the process of supplying coins and banknotes to the banking sector is described. This is followed by exercises aiming at finding useful models for forecasting cash demand for the horizons up to three years, which are the relevant ones for planning purchases and delivery of individual banknotes in Chile. With respect to the aggregate circulating stock of cash, time series models seem to perform better for the one–year–ahead horizon, while models based on fundamental variables are better for two and three years. Time series models for each denomination seem to be the best forecasting option to guide the purchases of notes and coins.
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