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Electronic Money: Sustaining Low Inflation

Author

Listed:
  • Marimon, R.
  • Nicolini, J.P.
  • Teles, P.

Abstract

We 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.

Suggested Citation

  • Marimon, R. & Nicolini, J.P. & Teles, P., 1998. "Electronic Money: Sustaining Low Inflation," Economics Working Papers eco98/15, European University Institute.
  • Handle: RePEc:eui:euiwps:eco98/15
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    More about this item

    Keywords

    ELECTRONIC MONEY ; INFLATION;

    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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