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Electonic Money and the Optimal Size of Monetary Unions

  • Costa Storti, Cláudia
  • De Grauwe, Paul
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    In this Paper we analyse whether the emergence of electronic money is likely to affect the optimal size of monetary unions. We distinguish between two possible future scenarios. In one scenario, electronic money supplants the existing publicly supported monetary networks (including the national payments systems). This scenario is likely to lead to larger monetary areas. It is also likely to lead to monetary instability. In a second scenario, electronic payments systems free ride on the existing national payments systems, which remain firmly in place. We argue that in this case also, the size of unified monetary areas is likely to increase.

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    Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3391.

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    Date of creation: May 2002
    Date of revision:
    Handle: RePEc:cpr:ceprdp:3391
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    1. Klein, Benjamin, 1974. "The Competitive Supply of Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(4), pages 423-53, November.
    2. Costa Storti, Cláudia & De Grauwe, Paul, 2001. "Monetary Policy in a Cashless Society," CEPR Discussion Papers 2696, C.E.P.R. Discussion Papers.
    3. Michael Woodford, 2000. "Monetary Policy in a World Without Money," NBER Working Papers 7853, National Bureau of Economic Research, Inc.
    4. Nicholas Economides, 1997. "The Economics of Networks," Industrial Organization 9701002, EconWPA.
    5. Fama, Eugene F., 1980. "Banking in the theory of finance," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 39-57, January.
    6. Matutes, Carmen & Regibeau, Pierre, 1992. "Compatibility and Bundling of Complementary Goods in a Duopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 37-54, March.
    7. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
    8. 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.
    9. Friedman, Benjamin M, 1999. "The Future of Monetary Policy: The Central Bank as an Army with Only a Signal Corps?," International Finance, Wiley Blackwell, vol. 2(3), pages 321-38, November.
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