The paper presents the results of forecasts for banknote circulation by denomination for Italy, Germany, France and Spain. Together, these four countries account for more than 80 per cent of circulation in the euro area. We rely on an econometric approach which delivers accurate forecasts without needing to include other macroeconomic variables, thus making the procedure less complex.
The results indicate a good forecasting performance for the proposed models over horizons of up to twelve months, in some cases yielding better results than those currently in use at individual national central banks. Further analyses to evaluate the performance of these models for longer-term forecasts are advisable before they are included in the basket used for the coordinated banknote demand forecasting exercise, which has a multi-year horizon.
