Does the Number of Banknotes in Circulation Already Exceed 900 Billion?

If every central bank and monetary authority were to consistently publish the number of banknotes in circulation, this article wouldn’t be necessary. However, that isn’t the case, and the question is raised every now then in discussions. Various estimates, some around 550 billion, are cited in industry reports and presentations, which prompted me to dig deeper as the numbers seemed low. This article highlights some of the challenges involved when considering the question and provides an estimate for further discussion.

Banknotes are a liability on the balance sheet of the issuing central bank and the first question is evidently which part of this liability is really ‘in circulation’. It is normal that some notes have been lost, burnt or taken abroad by tourists and seldom return. These amounts differ by denomination, low denominations having a higher share. Other than that, these notes are impossible to count.

More importantly, there might be banknotes which are no longer legal tender, but have not yet been demonetised and can still be redeemed by the respective central bank, even if they haven’t been issued for decades. Some central banks separate these banknotes on their balance sheet, and typically in the course of time there are only very minor changes in the annual figures. These notes that are mostly found in death estates or similar are in principle no longer in circulation and hence I have tried to exclude them in the following study.