Electronic Money and the Optimal Size of Monetary Unions

23 Pages Posted: 16 Jul 2002

See all articles by Claudia Costa Storti

Claudia Costa Storti

Banco de Portugal

Paul De Grauwe

London School of Economics & Political Science (LSE); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for Economic Policy Research (CEPR)

Date Written: May 2002

Abstract

In this Paper we analyse whether the emergence of electronic money is likely to affect the optimal size of monetary unions. We distinguish between two possible future scenarios. In one scenario, electronic money supplants the existing publicly supported monetary networks (including the national payments systems). This scenario is likely to lead to larger monetary areas. It is also likely to lead to monetary instability. In a second scenario, electronic payments systems free ride on the existing national payments systems, which remain firmly in place. We argue that in this case also, the size of unified monetary areas is likely to increase.

JEL Classification: E42, F33

Suggested Citation

Costa Storti, Claudia and De Grauwe, Paul, Electronic Money and the Optimal Size of Monetary Unions (May 2002). CEPR Discussion Paper No. 3391. Available at SSRN: https://ssrn.com/abstract=317690

Claudia Costa Storti (Contact Author)

Banco de Portugal ( email )

Ave Almirante Reis 72
1150 Lisbon
Portugal
+351 21 313 0823 (Phone)
+351 21 352 3505 (Fax)

Paul De Grauwe

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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