No. 40 - Banknote migration and the estimation of circulation in euro area countries: the italian case

In this paper we examine the difficulties faced by euro-area National Central Banks, since the changeover, in measuring banknote circulation in their respective countries, as a consequence of banknote migration across euro-area countries. Then, we describe a methodology for estimating Italian circulation, which integrates net issuance with information on banknote migration gathered from the Bank of Italy's survey on international tourism. We also propose empirical approaches that can provide indications on migration and circulation for individual denominations as well. Since the changeover, Italian circulation has increased significantly. Inflows from abroad have been recorded for all denominations, except for the €50 banknote. Circulation has been increasingly concentrating on medium denominations (€20 and €50); high ones (€100, €200 and €500) have been marginalized, while the use of lower ones (€5 and €10) has gradually decreased. These trends mainly reflect limits on cash payments and anti-money laundering controls.