Electronic Money and the Monetary Transmission Process

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• Publisher: Cuvillier Verlag
• Year: 2008
• Print ISBN: 9783867277600
• eBook ISBN: 9783736927605
• Edition: 1

The emergence of new digital payment media has been of growingimportance in the last two decades. These new forms of paymentmedia rise the questions wether and how the monetary control of thecentral bank is influenced. This book analysis the influence of electronicmoney's emergence on the monetary transmission processwhich is the central element linking monetary policy and the real economy.As economically most significant characteristics of electronicmoney low transaction costs as well as low regulation costs are isolated.As a consequence of these properties electronic money partiallysubstitutes for traditional payment media, but also the market volumefor payment media rises. A change in the allocation of the entire economyfollows. It turns out that electronic money does not impede thecentral bank's power to influence real economic activity. However itchanges the nature of the transmission process and forces the centralbank to react to changes in the relative importance of specific monetarytransmission channels. These results are generated by numericalsimulations of a version of today's most common workhorse modelfor monetary policy analysis: the dynamic new Keynesian generalequilibrium model.