What drives demand for banknotes? Swiss edition

Interesting paper by Katrin Assenmacher, Franz Seitz and Jorn Tenhofen:

Knowing the part of currency in circulation that is used for transactions is important information for a central bank. For several countries, the share of banknotes that is hoarded or circulates abroad is sizeable, which may be particularly relevant for largedenomination banknotes. We analyse the demand for Swiss banknotes over a period starting in 1950 to 2017 and use different methods to derive the evolution of the amount that is hoarded.

Our findings indicate a sizeable amount of hoarding, in particular for large denominations. The hoarding shares increased around the break-up of the Bretton Woods system, were comparatively low in the mid-1990s and have increased significantly since the turn of the millennium and the recent financial and economic crises.

Well, the results are just opposite of what central bankers and government will tell you. They say people hoard money for all kinds of illegal transactions, black money and so on. They never tell you that most of the time common people hoard money for all the policy problems created by the government and central banks.

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2 Responses to “What drives demand for banknotes? Swiss edition”

  1. sudhirjkhatwani Says:

    Hi Amol,

    I really enjoy your work. Would love to connect but not sure where? Thanks

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