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A New Mathematical Model to Design Optimum Denomination of Coins and Banknotes Range (ODCBR)

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  • Ghezavati , V. R.

    (Department of Industrial Engineering, Islamic Azad University, South Tehran Branch)

Abstract

When an individual make a cash payment, he needs to consider about the amount to be paid, the coins and banknotes which are available and amount of change. For central banks and retailers, it is of interest to understand how this individual choice process works. The literature of currency use concerns primarily theory given certain assumptions which can present appreciate denomination range by statistical analysis. Literature surveys try to answer the question that which is the best selection of available coins and banknotes in the wallet to fulfill the charge. There is no mathematical model which can optimize a specific denomination range of coins and banknotes. In this paper, we aim at modeling this process where denomination range of banknotes and coins are optimized through a mathematical model in which all parameters are assumed to be certain in a single period in any economy. Finally, some numerical examples are provided to illustrate the effectiveness of the proposed model.

Suggested Citation

  • Ghezavati , V. R., 2012. "A New Mathematical Model to Design Optimum Denomination of Coins and Banknotes Range (ODCBR)," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 6(4), pages 167-186, July.
    • Handle: RePEc:mbr:jmonec:v:6:y:2012:i:4:p:167-186
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    References listed on IDEAS

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    1. van Hove, Leo & Heyndels, Bruno, 1996. "On the optimal spacing of currency denominations," European Journal of Operational Research, Elsevier, vol. 90(3), pages 547-552, May.
    2. Fase, M. M. G., 1981. "Forecasting the demand for banknotes: some empirical results for the Netherlands," European Journal of Operational Research, Elsevier, vol. 6(3), pages 269-278, March.
    3. Case M. Sprenkle, 1993. "The Case of the Missing Currency," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 175-184, Fall.
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    Cited by:

    1. Joshi Harit & Mukherjee, Saral, 2017. "Transitions in currency denomination structure as supply disruption and demand distortion: Efficiency, Effectiveness and Bullwhip," IIMA Working Papers WP 2017-05-02, Indian Institute of Management Ahmedabad, Research and Publication Department.

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