There are many euro banknotes that have not been returned to Portuguese banks. Tier gains fell in the first month of 2020 and are now down 50% in February. For preventive reasons, there is a lot of money left at home, because there are more circulation barriers, and there is a fear of more physical contact with others.
Due to the limitations and concerns of the epidemic, Portuguese residents saved more euros at home. For precautionary reasons, a “reserve” is being created, which is an official message from the Bank of Portugal (BdP) to Dinheiro Vivo (DV).
In addition, the collapse of the tourism industry has also reduced the euro (value and number of banknotes) entering the country through foreign tourists. The value of cash transactions will also decline because of the increasing purchases through digital platforms and online stores.
In any case, the Bank of Portugal and the European Central Bank (ECB) report that due to the uncertainty created by the pandemic crisis, the current phenomenon more reflects the desire to have money in “reserves”.
There are two main types of banknote flows that can be used to determine the actual amount of euros in circulation in the economy (the net issuance of banknotes). The reason for this problem is that there is a difference between the bills withdrawn after the transaction is completed and the bills returned to the central bank (so-called deposits).
According to the historical data of BdP analyzed by DV, due to the pandemic (decreased about a year ago), the amount of deposits (returning banknotes to the central bank) dropped sharply after the first imprisonment, and dropped again in the second imprisonment (last year) Developed in January).
The historical value we are talking about has fallen by 60% (April 2020 and May 2020), and the current value has fallen by 20% (January and February 2021, 50%). The official collection dates back to 2002, when Euro banknotes and coins began to circulate.
Next Wednesday (14th), Banco de Portugal will release Currency issuance report Relative to 2020, it will introduce in more detail what happened when Euro banknotes were used in Portugal in the first year of the pandemic.
As mentioned earlier, the tourism industry has actually been interrupted these months. This fact also explains this phenomenon of not returning money to the central bank. However, it did not give an obvious explanation. A new study by the European Central Bank.
Where is the comment and what does it mean?
According to a new survey conducted by the European Central Bank for the entire Eurozone, “compared to last year, the circulation of banknotes is not as active. Reflects the urge to maintain cash reserves for preventive savings reasons [precaução], In addition to confirming weak demand for transaction reasons.”
In other words, people actually save more money at home for “prevention” reasons, which is understood to be constraints caused by the pandemic (fear of social and physical contact) and isolation measures (circulation) Direct reflection. Restrictions, curfews, etc.).
According to research released by the European Central Bank, “the reasons for this behavior may include increased uncertainty and decreased liquidity (allowing households to retain higher value, thereby reducing the need to go to the banknote dispenser”).
The ECB study added: “The decrease in the flow of banknotes into and out of the central banks of the euro system indicates a decrease in active circulation, which indicates an increase in the need for preventive measures, which may be due to increased uncertainty and decreased liquidity. “This phenomenon is called “musical note paradox.”
There is a demand for money (notes), but less currency is used in the transaction, and it takes longer to return to the central bank (such deposits suddenly decrease).