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Does banknote quality affect counterfeit detection? Experimental evidence from Germany and the Netherlands

Author

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  • van der Horst, Frank
  • Eschelbach, Martina
  • Sieber, Susann
  • Miedema, Jelle
Abstract
Counterfeit prevention is a major task for central banks, as it helps to maintain public confidence in the currency. It is often maintained that a high quality of the banknotes in circulation helps the public detect counterfeits. However, there has not been any scientific evidence in support of this assertion so far. The present study is a first attempt to fill this research gap. To investigate whether banknote quality affects counterfeit detection, De Nederlandsche Bank (DNB) and the Deutsche Bundesbank (DBB) conducted a field study in 2014 and 2015 amongst 250 consumers and 261 cashiers in the Netherlands and Germany. Participants received a set of 200 banknotes with either a high or a low average soil level, based on the actual circulation in two different countries. Real-life circulation in both Germany and the Netherlands is in between these values. Each set contained 20 counterfeit notes, which testees were asked to detect. On average, untrained consumers detect 79% of the counterfeits, whereas retail cashiers detect 88%. Cashiers are found to detect more counterfeits when the set is clean, even after controlling for a wide range of personal characteristics in a regression. The estimated effect of cleanliness on the cashiers' detection rate is an additional 0.87 out of 20 counterfeits (4.4%) For consumers, the quality of the sets does not change the hit rate in a statistically significant way.

Suggested Citation

  • van der Horst, Frank & Eschelbach, Martina & Sieber, Susann & Miedema, Jelle, 2016. "Does banknote quality affect counterfeit detection? Experimental evidence from Germany and the Netherlands," Discussion Papers 06/2016, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:062016
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    References listed on IDEAS

    as
    1. John Bagnall & David Bounie & Kim P. Huynh & Anneke Kosse & Tobias Schmidt & Scott Schuh, 2016. "Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 1-61, December.
    2. John Bagnall & David Bounie & Kim P. Huynh & Anneke Kosse & Tobias Schmidt & Scott Schuh, 2016. "Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 1-61, December.
    3. Nicole Jonker & Bram Scholten & Marco Wind (DNB) & Martijn van Emmerik & Marieke van der Hoeven (TNO Human Factors), 2006. "Counterfeit or genuine: can you tell the difference?," DNB Working Papers 121, Netherlands Central Bank, Research Department.
    4. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
    5. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    6. Hans de Heij, 2010. "Banknote design for retailers and public," DNB Occasional Studies 804, Netherlands Central Bank, Research Department.
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    Cited by:

    1. Frank van der Horst & Jelle Miedema & Joshua Snell & Jan Theeuwes, 2020. "Banknote verification relies on vision, feel and a single second," Working Papers 680, DNB.

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    More about this item

    Keywords

    banknotes; counterfeits; banknote quality; signal detection theory;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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