The volume of euro coins held for transaction purposes in Germany

Altmann, Markus and Bartzsch, Nikolaus (2014): The volume of euro coins held for transaction purposes in Germany.

Abstract

According to estimates using the seasonal method, the volume of euro coins held for transaction purposes in Germany in 2011 stood at €2.3 billion; this corresponds to around 36% of the total volume of German (ie issued by the Deutsche Bundesbank) euro coins in circulation. 76% of the total volume of coins held for transaction purposes was accounted for by €1 and €2 coins. Only in the case of €2 coins has the cash stock held for transaction purposes made a significant contribution to the growth in the volume of coins in circulation in recent years. Therefore, structural models are the most suitable method of determining the demand for this denomination. Given the overall weakness in the growth of the cash held for transaction purposes, coin processing costs have, all other things being equal, risen less sharply than the volume of coins in circulation. Small denomination coins (1 and 2 cent coins) account for comparatively low shares of the coins held for transaction purposes (less than 30%). This is because they are hoarded to a greater extent in order to lighten one’s wallet or purse, or are lost. This could be used as an argument for applying a rounding rule (to nearest five cents). It is presumed that abroad German euro coins are, on balance, only held outside the euro area. There they are being hoarded on a permanent basis. Due to the inadequate data availability, the cash balance held for domestic transactions by sector cannot be fully recorded. Estimates for 2011 put them at between €0.7 billion and €1.0 billion. Households and credit institutions accounted for the largest share.

• Item Type: MPRA Paper
• Language: English
• Keywords: Coins, transaction balance, hoarding, foreign demand, seasonal method, introduction of euro cash
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems ; Standards ; Regimes ; Government and the Monetary System ; Payment Systems

References

Bartzsch, N, G Rösl and F Seitz (2011a), Foreign demand for euro banknotes issued in Germany: estimation using direct approaches, Discussion Paper, Series 1, 20/2011, Deutsche Bundesbank.

Bartzsch, N, G Rösl and F Seitz (2011b), Foreign demand for euro banknotes issued in Germany: estimation using indirect approaches, Discussion Paper, Series 1, 21/2011, Deutsche Bundesbank.

Baumol, W J (1952), The transactions demand for cash: an inventory theoretic approach, Quarterly Journal of Economics, 66 (4), pp 545-556.

Bos, J W D (1994), The demand for coins in the Netherlands, DNB Quarterly Bulletin, June, pp 67-90.

Deutsche Bundesbank (2003), Münzgeldentwicklung in Deutschland – Eine empirische Studie über den Münzgeld- und Banknotenumlauf in der Bundesrepublik Deutschland mit einer Prognose der Münzgeldnachfrage bis 2007, March.

Deutsche Bundesbank (2009a), The development and determinants of euro currency in circulation in Germany, June, pp 45-58.

Deutsche Bundesbank (2009b), Payment behaviour in Germany. An empirical study of the selection and utilisation of payment instruments in the Federal Republic of Germany, June.

Deutsche Bundesbank (2012), Payment behaviour in Germany in 2011 – An empirical study of the utilisation of cash and cashless payment instruments, October.

Deutsche Bundesbank (2013), Current and projected development of coin circulation in Germany, Monthly Report, January, pp 29-41.

Deutscher ReiseVerband (2012), Fakten und Zahlen zum deutschen Reisemarkt 2011 – Eine Übersicht zusammengestellt vom Deutschen ReiseVerband (DRV), March.

Feige, E L (1997), Revised estimates of the underground economy: implications for US currency held abroad, Discussion Paper 13805, MPRA.

Feige, E L (2009), New estimates of overseas U.S. currency holdings, the underground economy and the “tax gap”, Discussion Paper 19564, MPRA.

Fischer, B, P Köhler and F Seitz (2004), The demand for euro area currencies: Past, present and future, Working Paper 330, European Central Bank, April.

Glanville, R G de (1970), The number of coins in circulation in the United Kingdom, Studies in Official Statistics, Research Series 2, Central Statistical Office.

Goldin, E (1985), Statistical analysis of coins lost in circulation, Journal of Business & Economic Statistics, 3 (1), pp 36-42.

Porter, R D and R Judson (1995), The location of U.S. currency: How much is abroad?, Board of Governors of the Federal Reserve System, October.

Porter, R D and R Judson (1996), The location of U.S. currency: How much is abroad?, Federal Reserve Bulletin, 82 (10), pp 883-903.

Seitz, F (1995), Der DM-Umlauf im Ausland, Discussion Paper 1/95, Volkswirtschaftliche Forschungsgruppe der Deutschen Bundesbank, May.

Seitz, F (2007), A simple way to capture transaction balances, Economics Letters, 95, pp 230-233.

Seitz, F and R Setzer (2009), The demand for German banknotes: structural modelling and forecasting, discussion paper, mimeo, April.

Seitz, F, D Stoyan and K-H Tödter (2012), Coin migration and seigniorage within the euro area, Jahrbücher für Nationalökonomie und Statistik, 232 (1), pp 84-92.

Sumner, S B (1990), The transactions and hoarding demand for currency, Quarterly Review of Economics and Business, 30 (1), pp 75-89.

Tobin, J (1956), The interest-elasticity of transactions demand for cash, Review of Economics and Statistics, 38 (3), pp 241-247.

United States Treasury Department (2006), The use and counterfeiting of United States currency abroad, Part 3, September.