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Modelling the Demand for Euro Banknotes

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  • António Rua

Abstract

Liquidity management is a key mission of a central bank. In particular, the adequate provision of banknotes requires the understanding of what drives currency demand in a continuously changing environment. The challenge is even bigger in the case of the European monetary union where the euro continues to develop into a well-established currency outside borders. The focus is on modelling euro banknotes demand namely by considering its denominational breakdown. Such an analysis allows to unveil the heterogeneous role played by the several drivers while providing a more in depth modelling of currency demand. The econometric approach pursued allows to take on board the interconnections across denominations both in the long- and short-run dynamics.

Suggested Citation

  • António Rua, 2019. "Modelling the Demand for Euro Banknotes," Working Papers w201905, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w201905
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    References listed on IDEAS

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    Cited by:

    1. Hans-Eggert Reimers & Friedrich Schneider & Franz Seitz, 2020. "Payment Innovations, the Shadow Economy and Cash Demand of Households in Euro Area Countries," CESifo Working Paper Series 8574, CESifo.

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