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Counterfeiting: A Canadian Perspective

Author

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  • John Chant

Abstract

Counterfeiting is a significant public policy issue, because paper money, despite rumours of its demise, remains an important part of our payments system. Various parties have a stake in the prevention of counterfeiting. For individuals and businesses, the share of counterfeits in outstanding currency indicates the likelihood that the next bill they receive will be counterfeit. For government, it indicates the extent to which the circulation of counterfeits displaces legitimate currency and reduces its seignorage benefit from the right to issue currency. Most significantly for monetary authorities, it indicates the degree to which counterfeiting challenges the integrity of the nation's currency. The author considers the economic issues that counterfeiting raises. He proposes an innovative method for estimating the quantity of counterfeit currency in circulation and develops estimates for Canada for 2001. Such a measure can make a significant contribution to public policy by providing a basis, through international comparisons, for assessing the effectiveness of different currency features in combatting counterfeiting.

Suggested Citation

  • John Chant, 2004. "Counterfeiting: A Canadian Perspective," Staff Working Papers 04-33, Bank of Canada.
    • Handle: RePEc:bca:bocawp:04-33
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    References listed on IDEAS

    as
    1. Tschoegl, Adrian E, 1997. "The Optimal Denomination of Currency: A Conjecture," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 546-554, November.
    2. David E. Altig, 2002. "Why is stable money such a big deal?," Economic Commentary, Federal Reserve Bank of Cleveland, issue May.
    3. Nosal, Ed & Wallace, Neil, 2007. "A model of (the threat of) counterfeiting," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 994-1001, May.
    4. Gerrit Bilkes, 1997. "The new bank note distribution system," Bank of Canada Review, Bank of Canada, vol. 1997(Summer), pages 41-54.
    5. Ruth A. Judson & Richard D. Porter, 2003. "Estimating the worldwide volume of counterfeit U.S. currency: data and extrapolation," Finance and Economics Discussion Series 2003-52, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Van Hove, Leo, 2015. "Modelling banknote printing costs: of cohorts, generations, and note-years," Economic Modelling, Elsevier, vol. 46(C), pages 238-249.
    2. Menzies, Gordon, 2004. "Money to burn, or melt? A cost-benefit analysis of Australian polymer banknotes," The North American Journal of Economics and Finance, Elsevier, vol. 15(3), pages 355-368, December.

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    More about this item

    Keywords

    Bank notes;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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