Working Paper: NBER ID: w7853
Authors: Michael Woodford
Abstract: This paper considers whether the development of electronic money' poses any threat to the ability of central banks to control the value of their national currencies through conventional monetary policy. It argues that even if the demand for base money for use in facilitating transactions is largely or even completely eliminated, monetary policy should continue to be effective. Macroeconomic stabilization depends only upon the ability of central banks to control a short-term nominal interest rate, and this would continue to be possible, in particular through the use of a channel' system for the implementation of policy, like those currently used in Canada, Australia and New Zealand.
Keywords: No keywords provided
JEL Codes: E42; E52; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Central Bank Control of Interest Rates (E52) | Macroeconomic Stabilization (E63) |
| Demand for Base Money Decrease (E41) | Central Bank Control of Interest Rates Effectiveness (E52) |
| Innovations in Payment Methods (E42) | Relationship between Monetary Base and Nominal Spending Complexity (E51) |
| Electronic Money Development (E40) | Central Bank Ability to Stabilize National Currencies (E58) |