Foreign Demand for Euro Banknotes Issued in Germany: Estimation Using Indirect Approaches

In this paper, we endeavour to determine the volume of euro banknotes issued by Germany that is in circulation outside Germany. In so doing, we draw a distinction between banknotes outstanding in non-euro-area countries and those that are in circulation in other euro-area countries. The analysis is based on approaches that estimate the volume of banknotes in circulation outside Germany indirectly. The observation period runs from 2002 to 2009. We discover that, at the end of 2009, a total of roughly two-thirds of Germany's cumulated net issuance of euro banknotes was in circulation outside Germany. The lion's share of roughly €160 billion was in non-euro-area countries, with the remaining €80 billion in other euro-area countries. Thus, the volume of German euro banknotes in circulation in Germany accounted for only roughly one-third of all banknotes issued by the Deutsche Bundesbank (€350 billion). This confirms the results of direct approaches.