Modelling the Daily Banknotes in Circulation in the Context of the Liquidity Management of the European Central Bank

55 Pages Posted: 20 Jan 2003

See all articles by Alberto Cabrero

Alberto Cabrero

Banco de España

Gonzalo Camba-Mendez

European Central Bank (ECB)

Astrid Hirsch

European Central Bank (ECB)

Fernando Nieto

Banco de España

Date Written: May 2002

Abstract

The main focus of this paper is to model the daily series of banknotes in circulation in the context of the liquidity management of the Eurosystem. The series of banknotes in circulation displays very marked seasonal patterns. To the best of our knowledge the empirical performance of two competing approaches to model seasonality in daily time series, namely the ARIMA-based approach and the Structural Time Series approach, has never been put to the test. The application presented in this paper provides valid intuition on the merits of each approach. The forecasting performance of the models is also assessed in the context of their impact on the liquidity management of the Eurosystem.

Keywords: Daily forecast, Liquidity Management, Time Series models, Seasonality, Cubic Splines

JEL Classification: C22, C51, C53, C59

Suggested Citation

Cabrero, Alberto and Camba-Mendez, Gonzalo and Hirsch, Astrid and Nieto, Fernando, Modelling the Daily Banknotes in Circulation in the Context of the Liquidity Management of the European Central Bank (May 2002). Available at SSRN: https://ssrn.com/abstract=357462

Alberto Cabrero

Banco de España ( email )

Madrid 28014
Spain

Gonzalo Camba-Mendez (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

Astrid Hirsch

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Fernando Nieto

Banco de España ( email )

Madrid 28014
Spain

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