Advanced Search
MyIDEAS: Login to save this paper or follow this series

Why Central Banks (and Money) Rule the Roost

Contents:

Author Info

  • C. Sardoni

Abstract

Some have argued that a significant decrease in the demand for money, due to financial innovations, could imply that central banks are unable to implement effective monetary policies. This paper argues that central banks are always able to influence the economy's interest rates, because their liability is the economy's unit of account. In this sense, central banks "rule the roost." In the 1930s, starting from Keynes's ideas and referring to money in general, Kaldor had followed a similar line of analysis. In principle, a new unit of account could displace conventional money and, hence, central banks. But this process meets relevant obstacles, which essentially derive from the externalities and network effects that characterize money. Money is a "social relation." Money and central banks are the outcome of complex social and economic processes. Their displacement will occur through equally complex processes, rather than through mere innovation.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.levyinstitute.org/pubs/wp_457.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_457.

as in new window
Length:
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:lev:wrkpap:wp_457

Contact details of provider:
Web page: http://www.levyinstitute.org

Related research

Keywords:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Holthausen, Cornelia & Monnet, Cyril, 2003. "Money and payments: a modern perspective," Working Paper Series, European Central Bank 0245, European Central Bank.
  2. Hicks, J. R., 1975. "Value and Capital: An Inquiry into some Fundamental Principles of Economic Theory," OUP Catalogue, Oxford University Press, Oxford University Press, edition 2, number 9780198282693, October.
  3. Lahdenperä, Harri, 2001. "Payment and financial innovation, reserve demand and implementation of monetary policy," Research Discussion Papers, Bank of Finland 26/2001, Bank of Finland.
  4. Charles Goodhart, 2000. "Can Central Banking Survive the IT Revolution?," FMG Special Papers, Financial Markets Group sp125, Financial Markets Group.
  5. Goodhart, Charles A E, 2000. "Can Central Banking Survive the IT Revolution?," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 3(2), pages 189-209, July.
  6. Dowd, Kevin & Greenaway, David, 1993. "Currency Competition, Network Externalities and Switching Costs: Towards an Alternative View of Optimum Currency Areas," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 103(420), pages 1180-89, September.
  7. Bruce White, 2001. "Central banking: back to the future," Reserve Bank of New Zealand Discussion Paper Series DP2001/05, Reserve Bank of New Zealand.
  8. Michael Woodford, 2001. "Monetary Policy in the Information Economy," NBER Working Papers 8674, National Bureau of Economic Research, Inc.
  9. Michael Woodford, 2000. "Monetary Policy in a World Without Money," NBER Working Papers 7853, National Bureau of Economic Research, Inc.
  10. Bruce White, 2001. "Central Banking: back to the future," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, Reserve Bank of New Zealand, vol. 64, september.
  11. Freedman, Charles, 2000. "Monetary Policy Implementation: Past, Present and Future--Will Electronic Money Lead to the Eventual Demise of Central Banking?," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 3(2), pages 211-27, July.
  12. Goodhart, Charles A. E., 1998. "The two concepts of money: implications for the analysis of optimal currency areas," European Journal of Political Economy, Elsevier, Elsevier, vol. 14(3), pages 407-432, August.
  13. Michael Woodford, 2002. "Financial market efficiency and the effectiveness of monetary policy," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue May, pages 85-94.
  14. David Laidler, 2004. "Central Banks as Lenders of Last Resort - Trendy or Passe?," University of Western Ontario, Economic Policy Research Institute Working Papers, University of Western Ontario, Economic Policy Research Institute 20048, University of Western Ontario, Economic Policy Research Institute.
  15. Friedman, Benjamin M, 1999. "The Future of Monetary Policy: The Central Bank as an Army with Only a Signal Corps?," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 2(3), pages 321-38, November.
  16. Benjamin M. Friedman, 1999. "The Future of Monetary Policy: The Central Bank as an Army With Only a Signal Corps," NBER Working Papers 7420, National Bureau of Economic Research, Inc.
  17. Hicks, John, 1989. "A Market Theory of Money," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198287247, October.
  18. Dow, Sheila C & Smithin, John, 1999. "The Structure of Financial Markets and the 'First Principles' of Monetary Economics," Scottish Journal of Political Economy, Scottish Economic Society, Scottish Economic Society, vol. 46(1), pages 72-90, February.
  19. Friedman, Benjamin M, 2000. "Decoupling at the Margin: The Threat to Monetary Policy from the Electronic Revolution in Banking," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 3(2), pages 261-72, July.
  20. Benjamin M. Friedman, 2000. "Decoupling at the Margin: The Threat to Monetary Policy from the Electronic Revolution in Banking," NBER Working Papers 7955, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:lev:wrkpap:wp_457. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-Celeste Edwards).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.