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Forecasting banknote returns in a changing payments environment

Author

Listed:
  • Cronin, David

    (Advisor, Central Bank of Ireland)

  • Mcinerney, Niall

    (Senior Economist, Central Bank of Ireland)

Abstract

This paper provides a model for forecasting cash returns to central banks. Using data from Ireland, the study identifies a recent structural shift in the relationship between banknote returns and cashbased personal consumption expenditure, likely due to the adoption of contactless payments. Projections of banknote returns are informed by three elements: forecasts of personal consumption, the cash share of that spending, and the returns ratio — that is the ratio of (the log of) banknote returns to the (log of) cash-based personal consumption. To illustrate the modelling approach, the study considers the effects of future payment instrument choices and of COVID-19 on consumption to forecast cash returns for Ireland up to 2030.

Suggested Citation

  • Cronin, David & Mcinerney, Niall, 2022. "Forecasting banknote returns in a changing payments environment," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 16(2), pages 120-136, March.
    • Handle: RePEc:aza:jpss00:y:2022:v:16:i:2:p:120-136
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    Cited by:

    1. Cronin, David & McInerney, Niall, 2022. "ATM Cash Withdrawals Before, During and After the Covid-19 Pandemic," Economic Letters 6/EL/22, Central Bank of Ireland.

    More about this item

    Keywords

    banknote returns; contactless payments; COVID-19;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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