On the socially optimal density of coin and banknote series: Do production costs really matter?☆
Review articleOpen access
2017/06/01 Full-length article DOI: 10.1016/j.jmacro.2017.05.002
Journal: Journal of Macroeconomics
Highlights•Central banks opt for coin and banknote series with a relatively low density.•To test whether this is because of the production costs involved, we introduce a per-denomination fixed cost into the matching model of Lee et al. (2005).•We parameterize the model with data on the production of USD banknotes.•We find that central banks could increase the density of their series without the efficiency gains for transactors being overpowered by additional production costs.•We argue that the explanation thus rather lies with computational and switching costs incurred by consumers and merchants.
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