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The e-monetary theory

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  • Ngotran, Duong

Abstract

The author develops a dynamic model with two types of electronic money: reserves for transactions between bankers and zero-maturity deposits for transactions in the non-bank private sector. Using this model, he assesses the efficacy of unconventional monetary policy since the Great Recession. After quantitative easing, keeping the interest on reserves near zero too long might create deflation. The central bank can safely get out of the "low rate-cum-deflation" trap by "raising rate and raising money supply".

Suggested Citation

  • Ngotran, Duong, 2019. "The e-monetary theory," Economics Discussion Papers 2019-49, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201949
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    References listed on IDEAS

    as
    1. McGrattan, Ellen R., 1996. "Solving the stochastic growth model with a finite element method," Journal of Economic Dynamics and Control, Elsevier, vol. 20(1-3), pages 19-42.
    2. Ngotran, Duong, 2016. "The E-Monetary Theory," MPRA Paper 77206, University Library of Munich, Germany, revised 25 Feb 2017.
    3. Leland, Hayne E & Toft, Klaus Bjerre, 1996. "Optimal Capital Structure, Endogenous Bankruptcy, and the Term Structure of Credit Spreads," Journal of Finance, American Finance Association, vol. 51(3), pages 987-1019, July.
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    5. Mitchell, Douglas W, 1979. "Explicit and Implicit Demand Deposit Interest: Substitutes or Complements from the Bank's Point of View?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(2), pages 182-191, May.
    6. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
    7. Belongia, Michael T. & Ireland, Peter N., 2014. "The Barnett critique after three decades: A New Keynesian analysis," Journal of Econometrics, Elsevier, vol. 183(1), pages 5-21.
    8. Becker, William E, Jr, 1975. "Determinants of the United States Currency-Demand Deposit Ratio," Journal of Finance, American Finance Association, vol. 30(1), pages 57-74, March.
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    10. Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    interest on reserves; quantitative easing; unwinding QE; e-money; excess reserves; raise rate raise money supply;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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