Demographics and the Demand for Currency

I use data from the Bank of Canada's Bank Note Distribution System and exploit a natural experiment offered by the timing of Easter in the Gregorian calendar to analyze the effects of demographic change for currency demand. I find that the main drivers of low-denomination bank note demand are merchants. Merchants and the youngest age group, aged 15-24, are also a significant source of demand for twenty-dollar bank notes and for the total dollar value of withdrawals. In contrast, increases in the demographic age groups 25-54 and 55 plus tend to lower bank note withdrawals. Finally, I find no evidence that employment status is related to bank note demand, but that there is a difference between the bank note demand of men aged 15-24 and women aged 15-24: increases in the share of women aged 15-24 lead to increases in bank note demand.