Counterfeiting is a significant public policy issue, because paper money, despite rumours of its demise, remains an important part of our payments system. Various parties have a stake in the prevention of counterfeiting. For individuals and businesses, the share of counterfeits in outstanding currency indicates the likelihood that the next bill they receive will be counterfeit. For government, it indicates the extent to which the circulation of counterfeits displaces legitimate currency and reduces its seignorage benefit from the right to issue currency. Most significantly for monetary authorities, it indicates the degree to which counterfeiting challenges the integrity of the nation's currency. The author considers the economic issues that counterfeiting raises. He proposes an innovative method for estimating the quantity of counterfeit currency in circulation and develops estimates for Canada for 2001. Such a measure can make a significant contribution to public policy by providing a basis, through international comparisons, for assessing the effectiveness of different currency features in combatting counterfeiting.
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Paper provided by Bank of Canada in its series Working Papers with number
04-33.
Find related papers by JEL classification: E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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