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Monetary Policy in a World Without Money[Note 1. Prepared for a conference on ‘The Future of Monetary ...]
Author(s) -
Woodford Michael
Publication year - 2000
Publication title -
international finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 39
eISSN - 1468-2362
pISSN - 1367-0271
DOI - 10.1111/1468-2362.00050
Subject(s) - economics , monetary policy , monetary economics , monetary base , control (management) , interest rate , value (mathematics) , credit channel , central bank , macroeconomics , inflation targeting , management , machine learning , computer science
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.