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Modelling Institutional Change in the Payments System, and its Implications for Monetary Policy

  • F. H. Capie
  • D. P. Tsomocos
  • G. E. Wood

Many institutional changes have taken place to payments systems. Indeed, they have been in continual change ever since money first emerged as the dominant technology for conducting transactions. Means of settlement between banks have changed: cheques replaced cash in many transactions, and they have in their turn been replaced partially (much more in some countries than others) by cards. The aim of this paper is to appraise one such possible technological development, namely electronic barter, and to model both it and money as transactions technologies. By comparing the models, we shall be able to appraise the future of fiat money. We argue that the economising properties of fiat money will allow it to survive, despite actual and hypothetised technical progress which reduces the cost of electronic barter.

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Paper provided by Oxford Financial Research Centre in its series OFRC Working Papers Series with number 2005fe01.

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Date of creation: 2005
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Handle: RePEc:sbs:wpsefe:2005fe01
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  1. Edward Nelson, 2000. "Direct effects of base money on aggregate demand: theory and evidence," Bank of England working papers 122, Bank of England.
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  9. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1, September.
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