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In order to understand why there is a continuous increase in euro banknote circulation even though the use of cash for transactions is decreasing in the euro area - a phenomenon known as the paradox of banknotes - the members of the Overseas workstream of the Eurosystem Research Network on Cash (EURECA) have conducted a study on the foreign demand for euro banknotes. The results of this study are based on desk research using data collected in the Eurosystem and from other organisations, and using both proven and innovative techniques.

Cash payments are simple, secure, efficient and anonymous and therefore popular with consumers. At the same time, these properties also make cash a focal point for potential illegal uses. An oft-voiced opinion in the public debate is that cash promotes the shadow economy and is used as a means of financing crime. With these issues in mind, the Bundesbank has conducted a study on the extent of illicit cash use in Germany, in collaboration with Professor Friedrich Schneider of the Johannes Kepler University Linz. The study contains an overview of current economic research on the use of cash in the shadow economy as well as fresh empirical estimates by the authors. A panel econometric analysis looks at the impact of illicit cash use on cash lodgements at Bundesbank branches. The significance of illegal motives as drivers of the demand for small, medium and large denominations of banknotes from the Bundesbank and of domestic banknote demand is investigated using a time series econometric regression analysis. The study concludes that direct references to the volume of banknote circulation or the circulation of large-denomination banknotes are not suitable for analysing the demand for cash in the shadow economy. The results from the authors' empirical studies are mixed: shadow economic influences can only be proven for some of the alternative proxy variables used for the shadow economy. As a general rule, the illegal nature of such activities means that it is very difficult to provide hard research-based evidence about the scale of the cash demand resulting from the shadow economy and criminal activity. Empirical studies of the shadow economy are therefore fraught with above-average uncertainty, meaning that all results should be interpreted with caution. Zahlungen mit Bargeld sind einfach, sicher, effizient und anonym und darum bei Verbrauchern beliebt. Gleichzeitig rücken diese Eigenschaften Bargeld auch in den Fokus für illegale Verwendungsmöglichkeiten. Bargeld fördere die Schattenwirtschaft und diene als Mittel der Verbrechensfinanzierung - so wird in der öffentlichen Diskussion oft behauptet. Die Deutsche Bundesbank hat vor diesem Hintergrund in Zusammenarbeit mit Herrn Prof. Friedrich Schneider von der Johannes Kepler Universität Linz eine Studie zum Ausmaß der illegalen Bargeldverwendung in Deutschland durchgeführt. Die Studie enthält einen Überblick über die vorhandene volkswirtschaftliche Forschung zur Bargeldverwendung in der Schattenwirtschaft sowie eigene empirische Schätzungen. In einer panelökonometrischen Auswertung wird der Einfluss der illegalen Bargeldverwendung auf Bareinzahlungen bei Filialen der Bundesbank betrachtet. Mit einer zeitreihenökonometrischen Regressionsanalyse wird die Bedeutung illegaler Motive für die Nachfrage nach kleinen, mittleren und großen Banknotenstückelungen bei der Bundesbank sowie für die inländische Nachfrage nach Banknoten untersucht.

At the end of 2015, the Deutsche Bundesbank had issued a total net amount of just over €45 billion in €20 banknotes. In statistical terms, each resident living in Germany was therefore issued with around 30 banknotes of this denomination. Up until now, it was not clear how many of these German-issued euro banknotes are actually used for payment purposes. Owing to the introduction of the new Europa series of banknotes on 25 November 2015, it was possible to estimate the volume of €20 banknotes that are held for transaction purposes both in Germany and outside the euro area. The estimation of the volume of €20 banknotes held for domestic transaction purposes (known as the domestic transaction balance) is primarily based on the observed return flows of the old series (ES1) of €20 banknotes received by the Deutsche Bundesbank. The cash balance of €20 banknotes held for domestic transaction purposes was estimated at around €8.5 billion at the end of October 2015. This means that only 19% of the total (net) amount of €20 banknotes issued by the Deutsche Bundesbank up to the end of October 2015 were used for transaction purposes within Germany. The remaining 81% has either migrated abroad, been hoarded or got lost. The results of the analysis are also important as a means of explaining the just over €36 billion worth of ES1 €20 banknotes which are still outstanding in the Deutsche Bundesbank's balance sheet. Given that the cash balance held for domestic transaction purposes has since been almost fully replaced, it is no longer to be expected that ES1 banknotes will flow back to the Deutsche Bundesbank in any sizeable amounts. The volume of German-issued €20 banknotes – officially stemming from banknote shipments by the Deutsche Bundesbank – held for transaction purposes outside the euro area was estimated at just over €3 billion at the end of July 2016 using the biometric method. This estimate represents a lower level for the actual cash balance held for transaction purposes, as it does not incorporate banknote exports resulting from foreign travel and cash amounts sent abroad. It is derived from cumulated shipments of ES2 €20 banknotes up to the end of July 2016 and the value of the ES1 and ES2 €20 notes deposited in July 2016 at the shipment branches. In terms of the Deutsche Bundesbank's cumulated net shipments of €20 banknotes in the amount of around €12 billion at the end of 2015, the estimated cash balance (resulting from shipments) held for transaction purposes outside the euro area accounts for around 28%.

To facilitate a more detailed study of the volume of euro banknotes in circulation issued by the Deutsche Bundesbank, it is broken down into the components of foreign demand, domestic hoarding and domestic transaction balances. These banknote demand components are estimated using the direct approach “net shipments and foreign travel” as well as an indirect approach known as the “seasonal method”. According to the new estimates, which are based on a combination of the two approaches, around 65% to 70% of the arithmetical volume of euro banknotes issued by the Bundesbank were in circulation outside Germany at the end of 2015; of this figure, 40 to 50 percentage points were in circulation outside the euro area, and 20 to 30 percentage points in other euro-area countries. Between 30% and 35% of the Bundesbank’s cumulated net issuance was in circulation in Germany, of which 25 percentage points were hoarded and 5 to 10 percentage points held for transaction purposes. The newly estimated time series for domestic hoardings does not feature a noticeable break due to the euro area’s low-interest-rate environment; instead, Bundesbank-issued euro banknotes may be circulating in other euro-area countries in greater numbers.

This paper explains and forecasts the demand for banknotes issued in Germany. For small and large denomination notes we estimate vector error correction models (VECM). The results suggest that the long-run demand for German small denomination notes is mainly driven by domestic transactions and demand from outside the euro area. The transaction motive in the rest of the euro area is part of the short-term dynamics. The long-run demand for German large denomination notes is mainly driven by foreign demand both from the rest of the euro area and outside the EMU. The global financial crisis led to a one-time increase in the (real) demand for these notes. Our results are in line with estimates according to which the level and dynamics of banknote demand are mainly determined by foreign demand. Additionally, we present RegARIMA models for the medium denominations as it was not possible to build a VECM for these denominations.

This paper models the demand for banknotes issued in Germany. It highlights that all motives for holding banknotes are present in this case. Inter alia, special attention is paid to the role of card payments. For small and large denomination notes we are able to establish meaningful vector error correction models (VECM). The results suggest that the long-run demand for German small denomination notes is mainly driven by domestic transactions and demand from outside the euro area. The transaction motive in the rest of the euro area and non-cash payments are part of the short-term dynamics. The long-run demand for German large denomination notes is mainly driven by foreign demand both from the rest of the euro area and outside the EMU. The global financial crisis led to a one-time increase in the (real) demand for these notes. Our results are in line with estimates according to which the level and dynamics of banknote demand are largely determined by foreign demand. It was not possible to setup a VECM for medium denominations for which we resort to a singleequation approach. Card payments do not play any role for the medium and large denomination categories.

This paper explains and forecasts the demand for banknotes issued in Germany. For small and large denomination notes we estimate vector error correction models (VECM). The results suggest that the long-run demand for German small denomination notes is mainly driven by domestic transactions and demand from outside the euro area. The transaction motive in the rest of the euro area is part of the short-term dynamics. The long-run demand for German large denomination notes is mainly driven by foreign demand both from the rest of the euro area and outside the EMU. The global financial crisis led to a one-time increase in the (real) demand for these notes. Our results are in line with estimates according to which the level and dynamics of banknote demand are mainly determined by foreign demand. Additionally, we present RegARIMA models for the medium denominations as it was not possible to build a VECM for these denominations.

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.

Der Transaktionskassenbestand von Euro-Münzen in Deutschland betrug im Jahr 2011 nach Schätzungen mit der saisonalen Methode 2,3 Mrd. €, was etwa 36 % des gesamten deutschen (von der Deutschen Bundesbank emittierten) Euro-Münzumlaufs entspricht. 76 % dieses Transaktionskassenbestandes entfiel auf die 1-Euro- und die 2-Euro-Münze. Nur bei letzterer hat die Transaktionskasse in den letzten Jahren einen nennenswerten Beitrag zur Dynamik des Umlaufs geleistet. Daher eignen sich strukturelle Modelle am besten für die Münznachfrage nach dieser Stückelung. Wegen der insgesamt schwachen Dynamik der Transaktionskassenbestände sind die Münzgeldbearbeitungskosten in den letzten Jahren ceteris paribus weniger gestiegen als der mengenmäßige Münzumlauf. Die Transaktionskassenanteile sind bei den Kleinmünzen (1-Cent- und 2-Cent-Münzen) mit unter 30 % vergleichsweise niedrig, da diese in größerem Umfang gehortet werden, um das Portemonnaie zu entlasten, oder verloren gegangen sind. Dies könnte als Argument für eine Rundungsregel (auf fünf Cent) herangezogen werden. Im Ausland befinden sich deutsche Euro-Münzen (per Saldo) vermutlich nur außerhalb des Euro-Raums, wo sie dauerhaft gehortet werden. Die inländischen sektoralen Transaktionskassenbestände können wegen der unzureichenden Datenlage nur unvollständig erfasst werden. Sie lagen im Jahr 2011 schätzungsweise zwischen 0,7 Mrd. € und 1,0 Mrd. €. Der größte Teil entfiel auf Privatpersonen und Kreditinstitute.

In dem vorliegenden Papier versuchen wir den Bestand der Euro-Banknoten zu ermitteln, der sich von der deutschen Banknotenemission im Ausland befindet. Dabei unterscheiden wir nach Beständen, die außerhalb des Euro-Währungsraumes gehalten werden, und solchen, die in anderen Ländern der EWU zirkulieren. Die Analyse basiert auf Ansätzen, die den Auslandsumlauf auf indirektem Wege abschätzen. Der Untersuchungszeitraum reicht von 2002 bis 2009. Wir finden heraus, dass Ende 2009 insgesamt rund zwei Drittel der deutschen kumulierten Nettoemissionen im Ausland umliefen. Der größte Teil, etwa 160 Mrd. €, befand sich außerhalb des Euro-Raums, der Rest - 80 Mrd. € - lief in anderen EWU-Ländern um. Somit entsprach der Inlandsumlauf deutscher Euro-Banknoten nur rund einem Drittel aller von der Bundesbank in Höhe von 350 Mrd. € in Umlauf gegebenen Banknoten. Damit werden die Ergebnisse direkter Ansätze bestätigt. In this paper, we endeavour to determine the volume of euro banknotes issued by Germany that is in circulation outside Germany. In so doing, we draw a distinction between banknotes outstanding in non-euro-area countries and those that are in circulation in other euro-area countries. The analysis is based on approaches that estimate the volume of banknotes in circulation outside Germany indirectly. The observation period runs from 2002 to 2009. We discover that, at the end of 2009, a total of roughly two-thirds of Germany's cumulated net issuance of euro banknotes was in circulation outside Germany. The lion's share of roughly €160 billion was in non-euro-area countries, with the remaining €80 billion in other euro-area countries. Thus, the volume of German euro banknotes in circulation in Germany accounted for only roughly one-third of all banknotes issued by the Deutsche Bundesbank (€350 billion). This confirms the results of direct approaches.

In dem vorliegenden Papier versuchen wir, den Bestand der Euro-Banknoten zu ermitteln, der sich von der deutschen Banknotenemission im Ausland befindet. Dabei unterscheiden wir nach Beständen, die außerhalb des Euro-Währungsraums umlaufen, und solchen, die in anderen Ländern der EWU zirkulieren. Die Auswertung basiert auf verschiedenen verfügbaren Statistiken und Befragungen, die hilfsweise verwendet werden (direkte Ansätze). Der Untersuchungszeitraum geht von 2002 bis 2009. Wir finden heraus, dass insgesamt ca. 220 Mrd. € an deutschen Euro-Banknoten im Ausland umlaufen. Der größte Teil, etwa 160 Mrd. €, befindet sich außerhalb des Euro-Raums, der Rest - 60 Mrd. € - läuft in anderen EWU-Ländern um. Damit entspricht der Inlandsumlauf von Euro-Banknoten in Deutschland Ende 2009 (rd. 130 Mrd. €) nur rund einem Drittel aller von der Deutschen Bundesbank in Umlauf gegebenen Banknoten (350 Mrd. €).

In this paper, we endeavour to determine the volume of euro banknotes issued by Germany that is in circulation outside Germany. In so doing, we draw a distinction between banknotes outstanding in non-euro-area countries and those that are in circulation in other euro-area countries. The analysis is based on approaches that estimate the volume of banknotes in circulation outside Germany indirectly. The observation period runs from 2002 to 2009. We discover that, at the end of 2009, a total of roughly two-thirds of Germany's cumulated net issuance of euro banknotes was in circulation outside Germany. The lion's share of roughly €160 billion was in non-euro-area countries, with the remaining €80 billion in other euro-area countries. Thus, the volume of German euro banknotes in circulation in Germany accounted for only roughly one-third of all banknotes issued by the Deutsche Bundesbank (€350 billion). This confirms the results of direct approaches. In dem vorliegenden Papier versuchen wir den Bestand der Euro-Banknoten zu ermitteln, der sich von der deutschen Banknotenemission im Ausland befindet. Dabei unterscheiden wir nach Beständen, die außerhalb des Euro-Währungsraumes gehalten werden, und solchen, die in anderen Ländern der EWU zirkulieren. Die Analyse basiert auf Ansätzen, die den Auslandsumlauf auf indirektem Wege abschätzen. Der Untersuchungszeitraum reicht von 2002 bis 2009. Wir finden heraus, dass Ende 2009 insgesamt rund zwei Drittel der deutschen kumulierten Nettoemissionen im Ausland umliefen. Der größte Teil, etwa 160 Mrd. €, befand sich außerhalb des Euro-Raums, der Rest - 80 Mrd. € - lief in anderen EWU-Ländern um. Somit entsprach der Inlandsumlauf deutscher Euro-Banknoten nur rund einem Drittel aller von der Bundesbank in Höhe von 350 Mrd. € in Umlauf gegebenen Banknoten. Damit werden die Ergebnisse direkter Ansätze bestätigt.

In this paper, we analyze the volume of euro banknotes issued by Germany within the euro area with several seasonal methods. We draw a distinction between movements within Germany, circulation outside Germany but within the euro area and demand from non-euroarea countries. Our approach suggests that only about 20% of euro notes issued by Germany are used for transactions in Germany. The rest is hoarded (10%), circulates in other euro area countries (25%) or is held outside the euro area (45%). In dem vorliegenden Papier analysieren wir die Emissionen von Euro-Banknoten durch die Deutsche Bundesbank anhand verschiedener saisonaler Ansätze. Wir unterscheiden zwischen der Nachfrage aus Deutschland, der Haltung in anderen Euro-Ländern und Umlauf außerhalb des Euro-Währungsgebiets. Es stellt sich heraus, dass nur ca. 20 % der emittierten Banknoten für Transaktionszwecke in Deutschland gebraucht werden. Der Rest wird aus unterschiedlichen Gründen gehortet (10 %), läuft in anderen EWU-Ländern um (25 %) oder wird außerhalb des Euro-Raums gehalten.

In this paper, we endeavour to determine the volume of euro banknotes issued by Germany that is in circulation outside Germany. In so doing, we draw a distinction between banknotes outstanding in non-euro-area countries and those that are in circulation in other euro-area countries. The analysis is based on various available statistics and, as an additional aid, on surveys (direct approaches). The observation period runs from 2002 to 2009. We discover that German euro banknotes to a total amount of approximately €220 billion are in circulation outside Germany. The lion's share of roughly €160 billion is in non-euro-area countries, with the remaining €60 billion in other euro-area countries. Thus, the volume of outstanding euro banknotes in Germany at the end of 2009 (around €130 billion) accounts for only roughly one-third of all banknotes issued by the Deutsche Bundesbank (€350 billion). In dem vorliegenden Papier versuchen wir, den Bestand der Euro-Banknoten zu ermitteln, der sich von der deutschen Banknotenemission im Ausland befindet. Dabei unterscheiden wir nach Beständen, die außerhalb des Euro-Währungsraums umlaufen, und solchen, die in anderen Ländern der EWU zirkulieren. Die Auswertung basiert auf verschiedenen verfügbaren Statistiken und Befragungen, die hilfsweise verwendet werden (direkte Ansätze). Der Untersuchungszeitraum geht von 2002 bis 2009. Wir finden heraus, dass insgesamt ca. 220 Mrd. € an deutschen Euro-Banknoten im Ausland umlaufen. Der größte Teil, etwa 160 Mrd. €, befindet sich außerhalb des Euro-Raums, der Rest - 60 Mrd. € - läuft in anderen EWU-Ländern um. Damit entspricht der Inlandsumlauf von Euro-Banknoten in Deutschland Ende 2009 (rd. 130 Mrd. €) nur rund einem Drittel aller von der Deutschen Bundesbank in Umlauf gegebenen Banknoten (350 Mrd. €).

This paper analyzes the individual bidding behaviour of German banks in the money market auctions conducted by the ECB from the beginning of the third quarter of 2000 to the end of the first quarter of 2001. Our approach takes a variety of characteristics of the individual banks into account. In particular, we consider variable that capture the different use of liquidity and the different attitude towards liquidity risk of the individual banks. It turns out that these characteristics are reflected in the banks' respective bidding behaviour to a large extent. Thus our study contributes to a deeper understanding of the way liquidity risk is managed in the banking sctor.