The monetary authority of each country (or currency zone) is responsible for ensuring there is enough money in circulation to meet the commercial needs of the economy, and releases additional notes and coins when there is a demand for them.īanks would routinely or exceptionally order cash from the monetary authority to meet anticipated demand, and keep it in reserve in the bank. The currency in circulation in a country is based on the need or demand for cash in the community. For example, money may have been destroyed, or stored as a form of security (the proverbial “money under the mattress”), or by coin collectors, or held in reserve within the banking system, including currency held by foreign central banks as a foreign exchange reserve asset. The published amount of currency in circulation tends to be overstated by an unknown amount. More broadly, money in circulation is the total money supply of a country, which can be defined in various ways, but always includes currency and also some types of bank deposits, such as deposits at call.
In monetary economics, the currency in circulation in a country is the value ofĬurrency or cash (banknotes and coins) that has ever been issued by the country’s monetary authority less the amount that has been removed.
