Cash Versus E-Cash: A New Estimation for the Euro Area

20 Pages Posted: 15 Jul 2006

Date Written: November 2003

Abstract

Several methods for assessing the substitution of electronic money for fiat money have been proposed in the last few years. After a critical review of the various models, we propose a new substitution model which we apply to the euro area. By way of several numeric simulations, we show that the maximal reduction of fiat money supply can be estimated at 35%. The projected monetary effects in terms of seigniorage and changes to the structure of the European Central Bank's balance sheet could be more significant than envisaged initially in previous studies. This important result does not, however, justify the conclusion of certain authors that the monetary impact is likely to destabilise current monetary systems.

Keywords: Money, electronic money, demand for money

JEL Classification: E41

Suggested Citation

Bounie, David and Soriano, Sébastien, Cash Versus E-Cash: A New Estimation for the Euro Area (November 2003). Available at SSRN: https://ssrn.com/abstract=915018 or http://dx.doi.org/10.2139/ssrn.915018

David Bounie (Contact Author)

Télécom Paris ( email )

19 Place Marguerite Perey
Palaiseau, 91120
France

Sébastien Soriano

Telecom Paris ( email )

46, rue Barrault
Paris Cedex 13, F-75634
France

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