News Release
13 December 2004
Bank of Jamaica Currency Issue: Some Background Information
The Bank of Jamaica currency issue refers to Jamaican notes and coins in the hands of the
public (currency in circulation) in addition to notes and coins held by financial institutions in their
vaults (vault cash). The Bank of Jamaica redeems (buys) or issues (sells) notes and coins to
financial institutions in order to meet their demand for cash. The difference between currency
issued and what is redeemed during a period of time is referred to as net currency issue.
The various institutions’ cash holding policies and the demand from their customers determine
the level and frequency of currency issue from, and currency redemption to the Bank of Jamaica.
In December, there is normally a greater demand for cash because persons spend more during
the holiday season and the banks hold more cash in their vaults to ensure they have adequate
amounts to stock their automated banking machines (ABM) and to meet the public’s demand in
general.
As at end November 2003, the stock of currency issue amounted to $23 139.8 million, and as a
result of the demand for cash during the month of December, the stock increased to $29 426.5
million at 31 December 2003. This means that there was a net currency issue of $6 286.7 million
for the month of December. In other words, currency issue was 27.2 per cent higher at the end of
December 2003 than it was at the end of November 2003. Over the three year period 2000 to
2002, currency issue increased by 23.5 per cent on average in the month of December. As at end
November 2004, the stock of currency issue stood at $26 675.6 million.
Currency issue increased by 20.8 per cent during the year 2003. This was higher than the annual
increases of 8.3 per cent and 9 percent for 2001 and 2002, respectively. The outturn in December
2003 reflected the impact of higher inflation, as prices increased by more than 10.0 per cent on
average during 2003, the first time since 1996.
Other factors that influence annual growth in currency issue include the volume of transactions
and changes in the means of payment, that is, ABM usage, point of sale transactions (POS) and
the use of cheques. Increased transactions volumes and ABM use would tend to increase the
demand for cash. On the other hand, the increased use of POS and cheques would tend to offset
some of the need for cash. The interpretation of annual increases in currency is therefore not
purely indicative of additional spending but includes other dynamics. Analysts should therefore
use complementary data, for example, exchange rate and price movements, and changes in the
means of payment, when considering factors influencing the change in the demand for currency.
For the period 01-10 December 2004, Bank of Jamaica recorded $1338 million in net currency
issue, an increase of 5 per cent for the month to date. The total net increase expected for
December is approximately $6 500 million or 24 per cent.
Bank of Jamaica
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