Money in the Twenty-First Century

What implications do 21st century monetary innovations bring for holdings of central bank money and standards of value? Emerging technologies such as cybercash, e-cash, and smart cards can be expected to reduce demand for central bank money, but the theoretical framework for monetary policy has not changed. The authors stress three points in this paper: 1) money innovations tend to reduce the demand for central bank money, but it remains to be seen whether the predictability of that demand, and thus the reliability of monetary policy, will decline in the coming century; 2) in principle, monetary authorities can continue to determine the price level as long as final settlement of tax and other obligations takes place using central bank liabilities; and 3) the viability of competing currencies and standards of value is gaining steam as a lively field of research.