Cash for Transactions or Store‐of‐Value? A Comparative Study on Scandinavian Countries and Canada

ABSTRACT We estimate the demand for transactional and non‐transactional cash balances (banknotes and coins) in Canada, Denmark, Iceland, Sweden and Norway over the last decades exploiting the seasonality of cash demand. These countries share many features that are relevant for cash demand, but nevertheless show large differences in terms of aggregate cash balances. While Canada, Iceland and Denmark have seen increased aggregate cash balances, Norway and especially Sweden have seen a dramatic decline. We find that transactional balances have decreased somewhat in all of the countries and the differences in aggregated cash balances is due to differences in the development of non‐transactional cash balances. We argue that different de facto legal tender status, crisis exposures, foreign demand and cash supply‐side policies help explain these findings.