A framework for analyzing monetary policy in an economy with e-money / by Yu Zhu and Scott Hendry.: FB3-5/2019-1E-PDF

"This paper considers an economy where central-bank-issued fiat money competes with privately issued e-money. We study a policy-setting game between the central bank and the e-money issuer and find (1) the optimal monetary policy of the central bank depends on the policy of the private issuer and may deviate from the Friedman rule; (2) there may exist multiple equilibria; (3) when the economy approaches a cashless state, the central bank’s optimal policy improves the market power of the e-money issuer and can lead to a discrete decrease in welfare and a discrete increase in inflation; and (4) first best cannot be achieved. Central-bank-issued e-money leads to a simple optimal policy that achieves the first best"--Abstract.

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Publication information
Department/Agency Bank of Canada.
Title A framework for analyzing monetary policy in an economy with e-money / by Yu Zhu and Scott Hendry.
Series title Bank of Canada staff working paper, 1701-9397 ; 2019-1
Publication type Series - View Master Record
Language [English]
Format Electronic
Electronic document
Note(s) "January 2019."
Includes bibliographic references.
Includes abstract in French.
Publishing information Ottawa, Ontario : Bank of Canada, 2019.
Author / Contributor Zhu, Yu, 1966-
Hendry, Scott.
Description ii, 54 p.
Catalogue number
  • FB3-5/2019-1E-PDF
Subject terms Monetary policy
Electronic commerce
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