Article ID: | iaor2013446 |
Volume: | 35 |
Issue: | 1 |
Start Page Number: | 45 |
End Page Number: | 60 |
Publication Date: | Jan 2013 |
Journal: | Journal of Policy Modeling |
Authors: | Bouhdaoui Y, Bounie D, Van Hove L |
Keywords: | currency, cost benefit analysis |
We develop an analytical framework that allows central banks to assess whether changing the manufacturing material of their tokens would be beneficial. Applied to the case of the U.S., we find that a complete adoption of plastic notes would save the Fed $140 million per year but would entail a substantial migration cost in case of a “big bang”. On the level of individual denominations, we find that the $1 bill would be the most lucrative to replace and that the business case for the $100 bill is thin – suggesting that a partial adoption of polymer would make more sense.