Analysis of cash demand depending on the banking infrastructure development level

The study assesses the impact of changes in banking infrastructure (number of ATMs, branches of credit institutions), as well as the volume of cash withdrawal transactions using payment cards on the demand for banknotes of different denominational values in the Bank of Russia. The paper assumed that in and out transactions in the divisions of the Bank of Russia characterizing the cash demand of credit institutions indirectly reflect the need for cash among the population and businesses. ADL models were built for the region in particular and Russia in general to identify the factors that influence the demand. The study used quarterly data from the Bank of Russia’s statements for the period from Q1 2015 to Q2 2022 (for the region) and from Q1 2016 to Q2 2022 (for Russia). Total cash turnover, receipts and expenditures by total amount and by banknote denomination were selected as the dependent variables of demand for the models. The analysis of the estimated models confirmed that changes in the banking infrastructure, including the number of ATMs and offices, the volume and number of cash withdrawal transactions using payment cards, as well as the amount of demand in previous periods, influence cash demand. The paper revealed similar trends in the change in cash demand at the regional and national levels. The best models were used to conclude on the direction and degree of the influence of significant factors, as well as to make forecasts. The paper concludes of the necessity to support a developed network of ATMs and banking institutions to meet the demand for cash and ensure its availability. The research findings are integratable into the concept of the Basic Lines for Cash Circulation Development for 2021–2025 and can be useful in the elaboration of recommendations for cash circulation management, including the optimization of the ATM network and the nominal composition of banknotes.