Electronic Money and Its Impact on Central Banking and Monetary Policy

electronic property and Its Impact on Central Banking and financial Policy The confines electronic nones refers to various proposed electronic payment mechanisms designed for use by consumers to make retail payments. Digital money products have the potential to stand in central bank currency (Berentsen 1). This quote indicates that the advent of electronic money will have an impact on the banking system and financial policy. time this topic is controversial it seems obvious that some changes will result and that there is no prefect answer to predict this new instruments affect on monetary aggregates and the role of central banks. Its growth will be based on many things forthcoming technology, increased security, regulation, and ease of conversion. It can impact much(prenominal) variables as monetary supply, exchange rates, the money multiplier, velocity of money and seignorage. increase reliance on electronic money as a reserve for currency will directly affect the central bank and its see over monetary aggregates and policies. Electronic money is the money balance save electronically on a stored- care for card (Ely 1). These cards, smart cards, have a microprocessor embedded which can be loaded with a monetary value. other form of electronic money is network money, software that allows the transfer of value on computer networks, particularly the internet. Like a travelers check, a digital money balance is a floating claim on a private bank or other financial institution that is not linked to any particular account (Berentsen 1-2). This money is issued by twain public and private institutions worldwide and is raising concern about the future ability of central banks to set money supply targets. It is widely employ in... ... Money and Monetary Policy Separating Fact from Fiction. The Future of Money in the Information Age, CATO Institutes 14th Annual Monetary Conference. 23 May 1996. CATO Institute, 25 Nov. 2002 http//w ww.cato.org/moneyconf/14mc-2.htmlSeign, George. E-money Friend or Foe of Monetarism. The Future of Money in the Information Age, CATO Institutes 14th Annual Monetary Conference. 23 May 1996. CATO Institute, 25 Nov. 2002 Rahn, Dr. Richard W. On the Future of Electronic Payments. CATO congressional Testimony. 19 Sep. 2000. CATO Institute, 25 Nov. 2002 Berentsen, Aleksander. Digital Money, Liquidity, and Monetary Policy. 1997. First Money, 25 Nov. 2002 http//www.firstmonday.dk/issues/issue2_7/berentsen/