Forecasting Banknote Circulation During the COVID-19 Pandemic Using Structural Time Series Models

83 Pages Posted: 31 May 2023

See all articles by Nikolaus Bartzsch

Nikolaus Bartzsch

Deutsche Bundesbank

Marco Brandi

Bank of Italy

Lucas Devigne

Banque de France

Gianluca Maddaloni

Bank of Italy

Diana Posada Restrepo

Banco de España

Gabriele Sene

Bank of Italy

Raymond de Pastor

Banque de France

Multiple version iconThere are 2 versions of this paper

Date Written: May 12, 2023

Abstract

As part of the Eurosystem’s annual banknote production planning, the national central banks draw up forecasts estimating the volumes of national-issued banknotes in circulation for the three years ahead. As at the end of 2021, more than 80 per cent of euro banknotes in circulation (cumulated net issuance) had been issued by the national central banks of France, Germany, Italy and Spain (‘4 NCBs’). To date, the 4 NCBs have been using ARIMAX models to forecast the banknotes issued nationally in circulation by denomination (‘benchmark models’). This paper presents the structural time series models developed by the 4 NCBs as an additional forecasting tool. The forecast accuracy measures used in this study show that the structural time series models outperform the benchmark models currently in use at each of the 4 NCBs for most of the denominations. However, it should be borne in mind that the statistical informative value of this comparison is limited by the fact the projection period is only twelve months.

Keywords: euro, demand for banknotes, forecast of banknotes in circulation, structural time series models, ARIMA models, intervention variables

JEL Classification: C22, E41, E47, E51

Suggested Citation

Bartzsch, Nikolaus and Brandi, Marco and Devigne, Lucas and Maddaloni, Gianluca and Posada Restrepo, Diana and Sene, Gabriele and de Pastor, Raymond, Forecasting Banknote Circulation During the COVID-19 Pandemic Using Structural Time Series Models (May 12, 2023). Bank of Italy Occasional Paper No. 771, Available at SSRN: https://ssrn.com/abstract=4464311 or http://dx.doi.org/10.2139/ssrn.4464311

Nikolaus Bartzsch

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Marco Brandi

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Lucas Devigne

Banque de France ( email )

Paris
France

Gianluca Maddaloni

Bank of Italy ( email )

Diana Posada Restrepo

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Gabriele Sene (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Raymond De Pastor

Banque de France ( email )

Paris
France

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
46
Abstract Views
242
PlumX Metrics