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Monetary Policy in a Cashless Society

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  • Costa Storti, Cláudia
  • De Grauwe, Paul

Abstract

In this Paper we analyse how monetary policies will be affected in a cashless society. Our main conclusions are that the central bank will lose its traditional instruments of monetary policy. Open market operations and advances to banks will become ineffective as instruments to control the interest rate and the money stock. We argue that this leads to two possible avenues for the future role of the central bank. In the first one the central bank becomes dependent on the treasury, both as a means to obtain revenues and as a way to maintain some effectiveness for its traditional instruments on monetary policies. Another avenue consists of strengthening the supervisory role of the monetary authority. This strengthening would include the quality control of the loan portfolios of the money issuing institutions, as a way to ensure market stability and to avoid bank runs. Simultaneously, supervision would allow the central bank to impose reserve requirements and to influence the money supply.

Suggested Citation

  • Costa Storti, Cláudia & De Grauwe, Paul, 2001. "Monetary Policy in a Cashless Society," CEPR Discussion Papers 2696, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2696
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    References listed on IDEAS

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    1. Woodford, Michael, 2000. "Monetary Policy in a World without Money," International Finance, Wiley Blackwell, vol. 3(2), pages 229-260, July.
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    Cited by:

    1. Buiter, Willem H., 2004. "The Elusive Welfare Economics of Price Stability As A Monetary Policy Objective: Should New Keynesian Central Bankers Persue Price Stability," CEPR Discussion Papers 4730, C.E.P.R. Discussion Papers.
    2. Michael Woodford, 2001. "Monetary policy in the information economy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 297-370.
    3. Costa Storti, Cláudia & De Grauwe, Paul, 2002. "Electonic Money and the Optimal Size of Monetary Unions," CEPR Discussion Papers 3391, C.E.P.R. Discussion Papers.
    4. Jan Marc Berk, 2002. "Central banking and financial innovation. A survey of the modern literature," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 55(222), pages 263-297.
    5. Jan Marc Berk, 2002. "Central banking and financial innovation. A survey of the modern literature," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 55(222), pages 263-297.
    6. Buiter, Willem H., 2006. "The elusive welfare economics of price stability as a monetary policy objective: why New Keynesian central bankers should validate core inflation," Working Paper Series 609, European Central Bank.
    7. Jan Marc Berk, 2002. "Banca centrale e innovazione finanziaria. Una rassegna della letteratura recente," Moneta e Credito, Economia civile, vol. 55(220), pages 345-385.
    8. Peter Spahn, 2016. "Central Bank Design in a Non-optimal Currency Union A Lender of Last Resort for Government Debt?," ROME Working Papers 201610, ROME Network.
    9. Korhonen, Tapio, 2001. "Finnish monetary and foreign exchange policy and the changeover to the euro," Research Discussion Papers 25/2001, Bank of Finland.

    More about this item

    Keywords

    Cashless; Electronic Money; Monetary Policy;

    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

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