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When do plastic bills lower the bill for the central bank? A model and estimates for the U.S

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  • Bouhdaoui, Y.
  • Bounie, D.
  • Van Hove, L.
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    Abstract

    We develop an analytical framework that allows central banks to assess whether changing the manufacturing material of their tokens would be beneficial. Applied to the case of the U.S., we find that a complete adoption of plastic notes would save the Fed $140 million per year but would entail a substantial migration cost in case of a “big bang”. On the level of individual denominations, we find that the $1 bill would be the most lucrative to replace and that the business case for the $100 bill is thin – suggesting that a partial adoption of polymer would make more sense.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0161893812000968
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Policy Modeling.

    Volume (Year): 35 (2013)
    Issue (Month): 1 ()
    Pages: 45-60

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    Handle: RePEc:eee:jpolmo:v:35:y:2013:i:1:p:45-60

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    Web page: http://www.elsevier.com/locate/inca/505735

    Related research

    Keywords: Central banks; Plastic banknotes; Production costs; Seigniorage;

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