Monetary Policy, Monetary Areas, and Financial Development with Electronic Money

Author/Editor:

Marco Arnone ; Luca Bandiera

Publication Date:

July 1, 2004

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Electronic money (e-money), as a network good, could become an important form of currency in the future. Such a development could affect monetary policy effectiveness. If an increased use of e-money substantially limits the demand for central bank reserves, this limitation would require changes in the central bank operational target and a closer coordination of monetary and fiscal policies. Also, the optimal size of monetary unions would be different. However, the current level of e-money use does not seem to pose a threat to the stability of the financial system. Thus, central banks can successfully implement the objectives of monetary policy.

Series:

Working Paper No. 04/122

Subject:

English

Publication Date:

July 1, 2004

ISBN/ISSN:

9781451854527/1018-5941

Stock No:

WPIEA1222004

Format:

Paper

Pages:

42

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