Currency movements within and outside a currency union: The case of Germany and the euro area

• We study euro banknotes issued by Germany and circulating abroad and being hoarded.
• We use several seasonal models.
• We distinguish between demand from the rest of and outside the euro area.
• In 2009 about 70% of German banknotes is held abroad.
• Only 20% is used for transactions purposes.

In this paper, we analyse the volume of euro banknotes issued by Germany within the euro area with several seasonal methods. We draw a distinction between movements within Germany, circulation outside Germany but within the euro area and demand from non-euro-area countries. Our approach suggests that only about 20% of euro notes issued by Germany are used for transactions in Germany. The rest is hoarded (10%), circulates in other euro area countries (25%) or is held outside the euro area (45%).