Adding Mystery to the Case of the Missing Currency

The Federal Reserve Bank reports that approximately $300 billion worth of United States currency was in circulation in 1992. Yet based on household survey and other information, households and firms in the country claim to hold only a fifth of this total. A recent article by Sprenkle argues that the quot;missing currencyquot; is largely held outside the United States. In the present article we show that it is implausible that most of the missing currency is held outside the United States; with simple adjustments we are able to explain the whereabouts of about half of all the currency in circulation. Even these adjustments would imply very large overseas holdings of dollars, so we suspect that people hold surprisingly large amounts of currency; why this should be so is not yet fully understood