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E-barter versus fiat money: will central banks survive?

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  • F H Capie
  • Dimitrios P Tsomocos
  • Geoffrey E Wood

Abstract

New technology in computing has led some to suggest that the ability to settle transactions electronically will develop to such an extent that money will disappear from use. Two versions of this belief exist. One maintains that there will be 'e-money', issued conceivably by many organisations, and that this will replace central bank money. The other, on which this paper focuses, suggests a further development - that the very concept of a medium of exchange may become redundant, as assets or goods can be exchanged directly for other assets or goods through use of computing. In this paper we argue that the information-economising properties that allowed money to develop will also allow it to survive, despite actual and hypothesised technical progress which reduces the cost of electronic barter.

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Bibliographic Info

Paper provided by Bank of England in its series Bank of England working papers with number 197.

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Date of creation: Aug 2003
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Handle: RePEc:boe:boeewp:197

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  1. Dimitrios Tsomocos, 2003. "Equilibrium Analysis, Banking, Contagion and Financial Fragility," OFRC Working Papers Series 2003fe03, Oxford Financial Research Centre.
  2. Alchian, Armen A, 1977. "Why Money?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 9(1), pages 133-40, February.
  3. Martin Shubik & D.P. Tsomocos, 1993. "A Strategic Market Game with Seigniorage Costs of Fiat Money," Cowles Foundation Discussion Papers 1043, Cowles Foundation for Research in Economics, Yale University.
  4. Evan F. Koenig, 1989. "Real money balances and the timing of consumption: an empirical investigation," Research Paper 8906, Federal Reserve Bank of Dallas.
  5. Monnet, Cyril, 2002. "Optimal public money," Working Paper Series 0159, European Central Bank.
  6. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867-1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1.
  7. Charles Goodhart, 2000. "Can Central Banking Survive the IT Revolution?," FMG Special Papers sp125, Financial Markets Group.
  8. Mervyn King, 1999. "Challenges for monetary policy : new and old," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 11-57.
  9. Nelson, Edward, 2001. "Direct Effects of Base Money on Aggregate Demand: Theory and Evidence," CEPR Discussion Papers 2666, C.E.P.R. Discussion Papers.
  10. Bennett T. McCallum & Edward Nelson, . "An Optimizing IS-LM Specification for Monetary Policy and Business Cycle Analysis," GSIA Working Papers 1997-71, Carnegie Mellon University, Tepper School of Business.
  11. Martin Shubik, 2000. "The Theory of Money," Cowles Foundation Discussion Papers 1253, Cowles Foundation for Research in Economics, Yale University.
  12. Brunner, Karl & Meltzer, Allan H, 1971. "The Uses of Money: Money in the Theory of an Exchange Economy," American Economic Review, American Economic Association, vol. 61(5), pages 784-805, December.
  13. Fuhrer, Jeffrey C & Moore, George R, 1995. "Monetary Policy Trade-offs and the Correlation between Nominal Interest Rates and Real Output," American Economic Review, American Economic Association, vol. 85(1), pages 219-39, March.
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Cited by:
  1. Krueger, Malte, 2008. "Money: A Market Microstructure Approach," MPRA Paper 18416, University Library of Munich, Germany.

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