Could the Federal Reserve lower its overall currency processing costs by reallocating its high-speed currency sorting volume? Given estimates of currency shipping costs and scale economies for high-speed sorting, the authors’ model minimizes costs by optimal distribution of sorting volumes...

Given estimates of shipping costs and scale economies for high-speed currency sorting, the authors investigate whether the Federal Reserve might lower its costs by reallocating the volume of sorting among its processing sites.

Despite the increasing use of credit and debit cards and the emergence of various electronic payment instruments, currency remains king-at least for small-dollar-value transactions. The author examines the Federal Reserve's present role in providing currency and explores the challenges and...