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Immigration and large banknotes

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  • Andreas M. Fischer

Abstract

Do immigrants have a higher demand for large denominated banknotes than natives? This micro study examines whether cash orders for CHF 1,000 notes, a banknote used for storage purposes, is concentrated in Swiss municipalities with a high foreign-to-native ratio. Controlling for a range of regional indicators across 251 Swiss municipalities, European immigrants in Switzerland are found to hoard less CHF 1,000 banknotes than natives. This result says that immigration reduces seigniorage (per person) as measured by currency orders. A 1% increase in the immigrant-to-native ratio is coincident with a reduction in currency orders by CHF 4,000. The dampening effect is attributed to specific traits linked to immigrants.

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File URL: http://www.snb.ch/n/mmr/reference/working_paper_2010_17/source/working_paper_2010_17.n.pdf
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Bibliographic Info

Paper provided by Swiss National Bank in its series Working Papers with number 2010-17.

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Length: 52 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:snb:snbwpa:2010-17

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Keywords: immigration; large banknotes; hoarding; money demand;

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References

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  1. Tin, Jan, 2008. "An empirical examination of the inventory-theoretic model of precautionary money demand," Economics Letters, Elsevier, vol. 99(1), pages 204-205, April.
  2. Fischer, Andreas M, 2005. "Measuring Income Elasticity for Swiss Money Demand: What Do the Cantons Say About Financial Innovation?," CEPR Discussion Papers 5050, C.E.P.R. Discussion Papers.
  3. John V. Duca & William C. Whitesell, 1991. "Credit cards and money demand: a cross-sectional study," Research Paper 9112, Federal Reserve Bank of Dallas.
  4. Casey B. Mulligan & Xavier Sala-I-Martin, 1992. "U.S. Money Demand: Surprising Cross-Sectional Estimates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 285-343.
  5. Boeschoten, Willem C & Fase, Martin M G, 1992. "The Demand for Large Bank Notes," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(3), pages 319-37, August.
  6. Richard D. Porter & Ruth A. Judson, 1996. "The location of U.S. currency: how much is abroad?," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 883-903.
  7. Abdurrahman Aydemir & George J. Borjas, 2010. "Attenuation Bias in Measuring the Wage Impact of Immigration," NBER Working Papers 16229, National Bureau of Economic Research, Inc.
  8. Frenkel, Jacob A & Jovanovic, Boyan, 1980. "On Transactions and Precautionary Demand for Money," The Quarterly Journal of Economics, MIT Press, vol. 95(1), pages 25-43, August.
  9. Hiroshi Fujiki & Casey B. Mulligan, 1996. "A Structural Analysis of Money Demand: Cross-Sectional Evidence from Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 14(2), pages 53-78, December.
  10. Saul Lach, 2005. "Immigration and Prices," Working Papers 05-25, Utrecht School of Economics.
  11. Kenneth Rogoff, 1998. "Blessing or curse? Foreign and underground demand for euro notes," Economic Policy, CEPR & CES & MSH, vol. 13(26), pages 261-303, 04.
  12. Fujiki, Hiroshi, 2002. "Money Demand near Zero Interest Rate: Evidence from Regional Data," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(2), pages 25-41, April.
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Cited by:
  1. Kosse, Anneke & Jansen, David-Jan, 2013. "Choosing how to pay: The influence of foreign backgrounds," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 989-998.

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