Since 1987, the Banco de la República has used an issuance model to predict the different variables related to the production and management of paper money. Some of these variables are the amount of paper banknotes in circulation, the distribution of the banknotes amongst the different denominations, the replacement of deteriorated bank notes, the amount of new paper banknotes produced, and the amount of banknotes in inventory. Furthermore, the model also establishes the correct timing for the introduction of a new banknote denomination. This model, known as the "Metric-D system", was developed by L.C. Payne and H.M. Morgan for England and was adapted to fit the situation in Colombia.
The issuance model designed by the Banco de la República allows for the accomplishment of the following objectives:
- Prediction of the amount of paper banknotes that need to be produced allowing enough time for the industrial sector of the Bank to acquire the necessary materials, whilst keeping in mind that some of these materials have to be ordered from other countries. This prediction also ensures that the amount of paper money in inventory is enough to satisfy the economy’s demand as well as maintaining sufficient reserves to cover possible failures in distribution and production.
- Prediction of the dates for the introduction or substitution of new banknote denominations, and in the case of low denominations, for metallic coins. In this process, it is necessary for the Banco de la República to provide the economy with the paper money required for commercial transactions, whilst using the most rational volume of the different denominations to guarantee fluidity in the market and simultaneously minimise the cost of paper money production.
Specific information about banknotes and coins in Colombia, with characteristics and graphical samples, can be found in the section Caracteristics (only available in spanish )