Page 99 - Special Topic Session (STS) - Volume 4

STS566 Iluminada T. Sicat
for regional demand forecasting. Specifically, historical monthly series on the
net withdrawal is used owing to their high frequency data, and because they
proxy the demand for currency associated with economic growth. Moreover,
our exercises show that time-series banknote forecasts for the region simply
seek to extrapolate from past behavior and have shown to have better forecast
performance than their more theoretical counterparts.

7. Important Take Away In Forecasting Currency
1) Cash is expected to remain an important instrument to settle
transactions in the Philippines. While new payment opportunities such as
electronic payments may reduce the demand and use of cash in the
Philippines, especially for lower denominations, their overall impact may still
be negligible because of certain barriers and limitations.
2) Given these, forecasting the demand for cash using statistical models
provides better basis of estimates of how much currency and in what
denomination to order.
3) Be mindful of alternative payment infrastructure as they may alter
preference for certain denomination.
4) Finally, it is important to constantly evaluate and test the models for
robustness, reliability and goodness of fit.

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