The use of euro cash in CESEE and the role of euro adoption expectations

This short study presents data on the use of euro cash as a safe haven asset or as a means of payment over the last decade. We contrast these selected key indicators using OeNB Euro Survey data with the main literature findings on the determinants of currency substitution in Central, Eastern and Southeastern Europe (CESEE). According to these key indicators, euro cash holdings are currently widespread in Albania, Croatia, the Czech Republic, North and Serbia. Due to overall declining euro cash amounts in the region, the extent of currency substitution continues its long-term downward trend in all CESEE countries. However, we still see a medium to high level of currency substitution in Croatia, North Macedonia and Serbia. Apparently, the determinants of euroization that have been identified in former research are still at work; this finding rests on the new data points of the key indicators presented here with respect to euroization and CESEE respondents’ preferences for saving in cash or for saving in foreign currency as well as their habit of making certain payments in euro. Finally, we address the question whether EU integration prospects have an impact on people’s propensity to hold euro cash. The simple empirical analysis presented here finds a positive and significant influence of expected euro adoption on the likelihood that individuals hold euro cash. However, such expectations do not seem to affect the amounts of euro cash held.