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Demographics and the demand for currency

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  • Geoffrey R. Dunbar

    (Bank of Canada)

Abstract

I use data from the Bank of Canada’s Bank Note Distribution System and exploit a natural experiment offered by the timing of Easter in the Gregorian calendar to analyse the effects of demographic change for bank note demand by financial institutions from the Bank of Canada. I find that the main drivers of low-denomination bank note demand are merchants. Merchants and the youngest age group, aged 15–24, are also a significant source of demand for twenty-dollar bank notes and for the total dollar value of withdrawals. In contrast, increases in the demographic age groups 25–54 and 55 plus tend to lower bank note withdrawals. Finally, I find no evidence that employment status is related to bank note demand, but that there is a difference between the bank note demand of men aged 15–24 and women aged 15–24: increases in the share of women aged 15–24 lead to increases in bank note demand.

Suggested Citation

  • Geoffrey R. Dunbar, 2019. "Demographics and the demand for currency," Empirical Economics, Springer, vol. 57(4), pages 1375-1409, October.
    • Handle: RePEc:spr:empeco:v:57:y:2019:i:4:d:10.1007_s00181-018-1486-8
    DOI: 10.1007/s00181-018-1486-8
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    1. Camila Figueroa & Michael Pedersen, 2017. "Forecasting Demand for Denominations of Chilean Coins and Banknotes," Working Papers Central Bank of Chile 799, Central Bank of Chile.
    2. Hongyu Xiao, 2024. "Demand for Canadian Banknotes from International Travel: Indirect Evidence from the COVID-19 Pandemic," Staff Working Papers 24-23, Bank of Canada.

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    More about this item

    Keywords

    Currency demand; Demographics; Denominations;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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