Electronic Money and Its Impact on Central Banking and Monetary Policy

Electronic bullion and Its Impact on Central Banking and Monetary Policy The term electronic property refers to various proposed electronic payment mechanisms designed for use by consumers to snitch retail payments. Digital property products have the potential to replace underlying bank gold (Berentsen 1). This quote indicates that the advent of electronic money forget have an impact on the banking system and monetary policy. While this issue is contr all oversial it seems obvious that some changes will result and that there is no prefect answer to predict this new instruments affect on monetary aggregates and the procedure of central banks. Its growth will be based on galore(postnominal) things future technology, increased security, regulation, and ease of conversion. It can impact such variables as monetary supply, exchange rates, the money multiplier, velocity of money and seignorage. Increased creed on electronic money as a substitute for currency will directly a ffect the central bank and its control over monetary aggregates and policies. Electronic money is the money balance recorded electronically on a stored-value card (Ely 1). These cards, smart cards, have a microprocessor insert which can be loaded with a monetary value. Another knead of electronic money is network money, software that allows the transfer of value on computer networks, particularly the internet. Like a travelers check, a digital money balance is a floating claim on a secluded bank or other financial institution that is not think to any particular account (Berentsen 1-2). This money is issued by both normal and private institutions worldwide and is raising concern about the future qualification of central banks to set money supply targets. It is widely used in... ... currency and Monetary Policy Separating Fact from Fiction. The Future of Money in the selective information Age, CATO Institutes 14th Annual Monetary Conference. 23 whitethorn 1996. CATO In stitute, 25 Nov. 2002 http//www.cato.org/moneyconf/14mc-2.htmlSeign, George. E-money Friend or Foe of Monetarism. The Future of Money in the Information Age, CATO Institutes 14th Annual Monetary Conference. 23 May 1996. CATO Institute, 25 Nov. 2002 Rahn, Dr. Richard W. On the Future of Electronic Payments. CATO Congressional Testimony. 19 Sep. 2000. CATO Institute, 25 Nov. 2002 Berentsen, Aleksander. Digital Money, Liquidity, and Monetary Policy. 1997. First Money, 25 Nov. 2002 http//www.firstmonday.dk/issues/issue2_7/berentsen/