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%).