The Value of Paper Money Around the World - Currency Notes - IMF F&D Magazine - June 2018 | Volume 55 | Number 2
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Bibliographic details
- Authors: TADEUSZ GALEZA, JAMES CHAN
- Published: June 1, 2018
- Volume: 55
Publication and authors
- F&D Magazine, Striking the Right Note
- TADEUSZ GALEZA, JAMES CHAN
- June 2018
- TADEUSZ GALEZA is a research officer in the IMF’s Monetary and Capital Markets Department.
- JAMES CHAN is a senior information management assistant in the IMF’s Statistics Department.
Historical and cultural role of paper money
- Money has taken many forms throughout history: strings of shells in the Solomon Islands, large stone disks on Yap, wheels of Parmigiano-Reggiano cheese in Italy.
- Modern banknotes serve as an artistic expression of national sovereignty, often immortalizing famous authors, activists, local wildlife, and iconic national landmarks.
- Banknotes represent the essence, history, beauty, and ideals to which each country aspires.
Global currency landscape and physical characteristics
- The IMF’s 189 member countries issue 136 unique national currencies and form four currency unions.
- Banknote physical-size examples:
- Malawian kwacha: the smallest banknote in the study at about 87 percent the size of the US dollar bill.
- Brunei dollar and Singapore dollar: the largest banknotes in circulation in the study, each with a total area of more than 150 percent of the US dollar bill.
- Swiss francs: tend to be very slender.
- British pounds and Kenyan shillings: tend to be more square.
- Most banknotes are rectangular and wider rather than tall.
Functional properties of currency
- Banknotes fulfill the same defining properties worldwide: they are a unit of measure, a store of value, and a medium of exchange.
- Paper bills, or “fiat” money, have no intrinsic value; their worth is determined solely through supply and demand and they are declared legal tender by government decree.
Nominal vs. real value and notable denominations
- Central banks decide largest notes in circulation; nominal value is indicated by the number of zeros.
- Current largest bills in circulation range from 20 Bahrain dinars to 500,000 Vietnamese dong.
- Historical hyperinflation examples:
- Yugoslavia issued a 500 billion dinar bill in 1991.
- Zimbabwe issued a 100 trillion dollar bill in 2009.
- Common practice: a hundred units of currency (for example, 100 US dollars) is most commonly the highest available banknote in each country.
- Real-value highlights:
- On average, the largest banknote in circulation across countries is equivalent to 33 US dollars.
- It takes three 100 South Sudanese pound notes (their largest in circulation) to purchase a medium coffee at Starbucks.
- It takes two of Brunei’s largest bills—10,000 dollar notes—to buy a 2018 Toyota Yaris sedan.
Future outlook
- Digital currencies and online transactions are gaining steam worldwide, putting the future of paper money potentially in jeopardy.
- The physicality that once defined value is giving way to a new global, digital economy where more transactions—big and small—are processed electronically.
- Possible evolution: countries may one day design and issue virtual banknotes, embedded with richer features to celebrate national heritage.
- Short-term outlook: paper banknotes continue to retain an undeniable appeal.
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