Germany’s High Coin Demand Driven by Domestic Demand

The Bundesbank (BBk) provides 25.5% of the fully paid capital that underpins the European Central Bank (ECB), but it has brought into circulation 29.9% of the value of coins in circulation (€8.46 billion). This figure has been stable for some time.

Is this because Germany uses more coins than other countries or because the flow of coins out of Germany exceeds the flow of coins in? There is an assumption it is because of an outflow. If true, then Germany is earning extra revenue from these coins over and above its own indent.

The BBk discussion paper 49/2020 by Matthias Uhl. ‘Coin Migration Between Germany and Other Euro Area Countries’, seeks to establish the real situation.

The paper builds new models to answer the question. The author differentiates between domestic transaction balances, domestic hoarding and foreign demand to build a comprehensive estimate of coin outflows from Germany of German issued coins.