Chapter 4: Money in the Time of the Internet: Electronic Money and its Effects
Claudio Sardoni* 1 INTRODUCTION In the last few years, much attention has been paid to the effects that the socalled information technology (IT) revolution can have on the monetary and ﬁnancial system of advanced economies. This chapter considers the impact that these technological changes can have on central banks and their ability to implement an effective monetary policy, a topic recently discussed by many monetary economists. In this context, particular attention is paid to the role and effects of electronic money (e-money). Some believe that recent technological developments can reduce signiﬁcantly the importance of central banks and their ability to implement monetary policy. Others have responded by holding that IT advances do not imply radical changes of the existing monetary organization in advanced economies. In this debate, e-money is often regarded as an exempliﬁcation of what the IT revolution can bring about. After having deﬁned precisely what is meant by e-money and having considered some basic characteristics of this new means of payment (section 2), I turn to consider the current debate on IT and the future of central banking (section 3). In the concluding section 4, I argue that, although in principle IT advances could imply a signiﬁcant weakening of the central banks’ power, this requires that e-money evolves into a means of payment different from the current one. In particular, I argue that in order to arrive at a world in which central banks have, mostly or entirely, lost their power, it is necessary...
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