Norges Bank

Staff Memo

Forecasting demand for various denominations of notes and coins using error correction models

Bent Vale
Staff Memo


In this paper we present a set of error correction models in order to forecast separately the change in demand for each of the notes and coins issued by Norges Bank. Such forecasts can play a role in planning how many new banknotes and coins Norges Bank should order from its producers. The explanatory variables upon which we condition the  forecasts include: households' point of sales consumption, the number of EFTPOS terminals, money market interest rate, as well as some dummies for particular events. The estimated effects seem overall to correspond with findings by other studies. Interestingly, we find that as consumers to a larger extent use EFTPOS cards for their point of sales consumption, holdings of the lowest value denomination coin increase, something we attribute to consumers leaving stocks of low value coins at home since they are less frequently used for paying.

Staff Memos present reports and documentation written by staff members and affiliates of Norges Bank, the central bank of Norway. Views and conclusions expressed in Staff Memos should not be taken to represent the views of Norges Bank.

ISSN 1504-2596 (online)

Published 24 March 2015 12:15
Published 24 March 2015 12:15