In monetary economics, the currency in circulation in a country is the value of currency or cash (banknotes and coins) that has ever been issued by the country’s monetary authority less the amount that has been removed. More broadly, money in circulation is the total money supply of a country, which can be defined in various ways, but always includes currency and also some types of bank deposits, such as deposits at call.
The published amount of currency in circulation tends to be overstated by an unknown amount. For example, money may have been destroyed, or stored as a form of security (the proverbial “money under the mattress”), or by coin collectors, or held in reserve within the banking system, including currency held by foreign central banks as a foreign exchange reserve asset.
Domestic demand for currency
The currency in circulation in a country is based on the need or demand for cash in the community. The monetary authority of each country (or currency zone) is responsible for ensuring there is enough money in circulation to meet the commercial needs of the economy, and releases additional notes and coins when there is a demand for them.
Banks would routinely or exceptionally order cash from the monetary authority to meet anticipated demand, and keep it in reserve in the bank. The banking regulator would typically determine the banks’ reserve requirements, including the minimum proportion of a bank’s assets that banks must hold in cash. When banks no longer believe they need as much cash in reserve they would return the cash to the monetary authority. Subject to directives from the regulator, banks tend to keep their cash reserves as low as is prudently necessary, as banks do not earn interest on it, and incur a cost to keep it securely. (The amount taken out of reserve is available for lending, at interest.) The amount of money needed to be at call varies because of a number of factors. For example, in many countries there is a higher demand at Christmas time when commercial activity is highest. Also, when workers were paid in cash, there was a higher demand for pay-day. There may also be sudden, unexpected surges in demand for cash by individuals during economic panics, which may result in a "run on the bank" as individuals seek to withdraw money from bank accounts. Cash held by banks is counted as part of the currency in circulation.
Cash that is in the hands of individuals and businesses in the community may be needed for routine or exceptional purchases or held in reserve. Nowadays, a large part of everyday transactions is effected using electronic funds transfers, without the use of cash. When a business makes a cash sale, it will keep the cash it receives until it pays it to someone else or deposits it into a bank account, keeping part of it in its "float", in order to give change to customers. A significant part of the cash in circulation is used by and held within the black economy.
Foreign currency reserves
Central banks of many countries hold currency of another country in their foreign exchange reserves, which can include banknotes, deposits, bonds, treasury bills and other government securities. The cash component is counted by the issuing central bank as part of its currency in circulation.
Total currency in circulation
In 1990, total currency in circulation in the world passed the equivalent of one trillion United States dollars. After 12 years, in 2002 this figure was two trillion USD, and in 2008 it had increased to four trillion USD. (These figures do not make allowance for inflation or population changes.)
The Bank for International Settlements provides detailed statistics of the worth of banknotes and coins for 18 major currencies used by the member states of the Committee on Payments and Market Infrastructures (CPMI). The table below shows the statistics as of 31 December 2016 in billions of US dollars using the exchange rate at the end of the year. The total value is $4,687 billion.
| Country or region | Billions of US dollars | US$ per capita |
|---|---|---|
| Switzerland | 79.68 | 9,516.04 |
| Hong Kong SAR | 54.16 | 7,341.34 |
| Japan | 915.72 | 7,214.21 |
| Singapore | 29.39 | 5,241.81 |
| United States | 1,509.34 | 4,671.03 |
| Euro area | 1,217.91 | 3,579.10 |
| Australia | 57.71 | 2,379.05 |
| Canada | 64.40 | 1,787.01 |
| Saudi Arabia | 53.33 | 1,677.72 |
| Korea | 80.48 | 1,584.11 |
| United Kingdom | 93.78 | 1,428.55 |
| Russia | 145.11 | 989.34 |
| Sweden | 6.88 | 688.80 |
| Mexico | 68.71 | 565.17 |
| Turkey | 35.40 | 443.58 |
| Brazil | 71.23 | 345.64 |
| India | 196.49 | 151.26 |
| South Africa | 7.20 | 130.90 |
| CPMI Total | 4,686.91 | 1,598.16 |
See also
- Business strike - coins intended for circulation (as opposed to commemorative and bullion coins)
- Coining
- Counterfeit money
- History of money
- List of circulating currencies
- Velocity of money
References
- Welch, Patrick J.; Gerry F. Welch (2016). Economics: Theory and Practice. John Wiley & Sons. p. 190. ISBN 978-1118949733. Retrieved 14 January 2017.
- Mike Hewitt (25 June 2009). Fiat Currency in Circulation, How Much Money is There?. The Market Oracle.
- Committee on Payments and Market Infrastructures(October 2017). Statistics on payment, clearing and settlement systems in the CPMI countries, Figures for 2016.
In monetary economics the currency in circulation in a country is the value of currency or cash banknotes and coins that has ever been issued by the country s monetary authority less the amount that has been removed More broadly money in circulation is the total money supply of a country which can be defined in various ways but always includes currency and also some types of bank deposits such as deposits at call The published amount of currency in circulation tends to be overstated by an unknown amount For example money may have been destroyed or stored as a form of security the proverbial money under the mattress or by coin collectors or held in reserve within the banking system including currency held by foreign central banks as a foreign exchange reserve asset Domestic demand for currencyThe currency in circulation in a country is based on the need or demand for cash in the community The monetary authority of each country or currency zone is responsible for ensuring there is enough money in circulation to meet the commercial needs of the economy and releases additional notes and coins when there is a demand for them Banks would routinely or exceptionally order cash from the monetary authority to meet anticipated demand and keep it in reserve in the bank The banking regulator would typically determine the banks reserve requirements including the minimum proportion of a bank s assets that banks must hold in cash When banks no longer believe they need as much cash in reserve they would return the cash to the monetary authority Subject to directives from the regulator banks tend to keep their cash reserves as low as is prudently necessary as banks do not earn interest on it and incur a cost to keep it securely The amount taken out of reserve is available for lending at interest The amount of money needed to be at call varies because of a number of factors For example in many countries there is a higher demand at Christmas time when commercial activity is highest Also when workers were paid in cash there was a higher demand for pay day There may also be sudden unexpected surges in demand for cash by individuals during economic panics which may result in a run on the bank as individuals seek to withdraw money from bank accounts Cash held by banks is counted as part of the currency in circulation Cash that is in the hands of individuals and businesses in the community may be needed for routine or exceptional purchases or held in reserve Nowadays a large part of everyday transactions is effected using electronic funds transfers without the use of cash When a business makes a cash sale it will keep the cash it receives until it pays it to someone else or deposits it into a bank account keeping part of it in its float in order to give change to customers A significant part of the cash in circulation is used by and held within the black economy Foreign currency reservesCentral banks of many countries hold currency of another country in their foreign exchange reserves which can include banknotes deposits bonds treasury bills and other government securities The cash component is counted by the issuing central bank as part of its currency in circulation Total currency in circulationIn 1990 total currency in circulation in the world passed the equivalent of one trillion United States dollars After 12 years in 2002 this figure was two trillion USD and in 2008 it had increased to four trillion USD These figures do not make allowance for inflation or population changes The Bank for International Settlements provides detailed statistics of the worth of banknotes and coins for 18 major currencies used by the member states of the Committee on Payments and Market Infrastructures CPMI The table below shows the statistics as of 31 December 2016 in billions of US dollars using the exchange rate at the end of the year The total value is 4 687 billion Value of banknotes and coin in circulation 31 December 2016 Country or region Billions of US dollars US per capitaSwitzerland 79 68 9 516 04Hong Kong SAR 54 16 7 341 34Japan 915 72 7 214 21Singapore 29 39 5 241 81United States 1 509 34 4 671 03Euro area 1 217 91 3 579 10Australia 57 71 2 379 05Canada 64 40 1 787 01Saudi Arabia 53 33 1 677 72Korea 80 48 1 584 11United Kingdom 93 78 1 428 55Russia 145 11 989 34Sweden 6 88 688 80Mexico 68 71 565 17Turkey 35 40 443 58Brazil 71 23 345 64India 196 49 151 26South Africa 7 20 130 90CPMI Total 4 686 91 1 598 16See alsoNumismatics portalBusiness and economics portalBusiness strike coins intended for circulation as opposed to commemorative and bullion coins Coining Counterfeit money History of money List of circulating currencies Velocity of moneyReferencesWelch Patrick J Gerry F Welch 2016 Economics Theory and Practice John Wiley amp Sons p 190 ISBN 978 1118949733 Retrieved 14 January 2017 Mike Hewitt 25 June 2009 Fiat Currency in Circulation How Much Money is There The Market Oracle Committee on Payments and Market Infrastructures October 2017 Statistics on payment clearing and settlement systems in the CPMI countries Figures for 2016
