The Globe and Mail reports in its Wednesday edition that a new paper by
Bank of Canada staff found that at the end of 2020, about $100-billion worth of banknotes were in circulation, a year-over-year increase of $13.8-billion.
The Globe's Matt Lundy writes that with typical growth rates, banknotes would have swelled by $4.9-billion last year -- meaning COVID-19 led to an extra $8.9-billion surge in demand.
In the pandemic's early stage, there was a "sharp spike" of withdrawals, driven by demand for $50 and $100 bills, the paper said. Meanwhile, deposits of cash into accounts were "persistently low" through 2020. This may have been owing to lockdown restrictions that slowed the turnover of cash in the economy, the researchers noted.
Ultimately, the flood of demand points to a particular reaction as the health crisis escalated, people were hoarding cash.
BOC researchers said, "The extraordinary increase in [notes in circulation] during this period was driven more by demand for large denomination notes rather than for small-denomination notes, suggesting that store of value was an important factor in these developments." Britain and the United States have also seen increases to their notes in circulation.
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