Over the past few decades, Germany's Ruhr Valley has undergone a massive structural shift from heavy industrial coal mining and steel production towards a service- and technology-oriented economy. The level of aggregate consumption in this region is deeply influenced by regional employment rates, household disposable income, and consumer confidence. During times of structural transition, government intervention is often required to support aggregate demand and prevent localized recessions.
Economic policy often focuses on the role of injections into the circular flow of income. For example, recent economic modeling of the Ruhr Valley's transition suggests that a targeted public injection of €160m into local green hydrogen infrastructure projects would generate a cumulative increase in regional GDP of €800m.
At the same time, regional financial habits are evolving. The use of physical cash for everyday transactions has decreased as contactless and digital banking platforms become dominant. In 2012, cash payments constituted 74% of point-of-sale transactions in the region. By 2020, this had declined to 42%, with economic forecasts predicting it to drop to 12% by 2028. This shift has changed the composition of currency in active circulation. Fig. 1 shows the total value of Euro (€) banknotes in active regional circulation across different denominations.
| Denomination | 2018 (€m) | 2019 (€m) | 2020 (€m) | 2021 (€m) | 2022 (€m) |
|---|---|---|---|---|---|
| €10 | 110 | 115 | 112 | 108 | 95 |
| €20 | 450 | 470 | 445 | 430 | 410 |
| €50 | 1,200 | 1,350 | 1,420 | 1,480 | 1,450 |
| €100 | 950 | 1,100 | 1,180 | 1,250 | 1,300 |
| Total | 2,710 | 3,035 | 3,157 | 3,268 | 3,255 |
Fig. 1 Value of regional Euro banknotes in circulation (€million) 2018–2022
Furthermore, the European Central Bank's monetary policy has navigated historically low interest rates to stimulate investment and manage inflationary pressures. When negative deposit rates are imposed, commercial banks face costs for storing excess reserves, which encourages them to increase lending to the private sector.
Based on the information provided, calculate the marginal propensity to withdraw (MPW) for the Ruhr Valley economy.
