Electronic Money: Sustaining Low Inflation
AbstractWe analyze the impact of electronic money competition on policy outcomes. We consider di®erent assumptions regarding the objectives of the central bank and its ability to commit to future policies. Electronic money competition can discipline a revenue maximizing government and result in lower equilibrium in°ation rates, even when there is imperfect commitment. The e±cient Friedman rule is only implemented if the government maximizes welfare. However electronic money competition may result in the Friedman rule being non credible. We also show how an indepen- dent choice of the reserve requirements can be an e®ective policy rule to enhance the disciplinary role of electronic money compe- tition.
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Bibliographic InfoPaper provided by European University Institute in its series Economics Working Papers with number eco98/15.
Length: 32 pages
Date of creation: 1998
Date of revision:
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ELECTRONIC MONEY ; INFLATION;
Find related papers by JEL classification:
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
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