MONETARY-POLICY IMPLICATIONS OF DIGITAL MONEY

The term digital money refers to various proposed electronic payment m echanisms designed to use by consumers to make retail payments. These mechanisms are based either on smart cards or on network money. Smart cards could potentially replace currency as the predominant means to p ay for retail purchases. Software-based digital money products (networ k money) bring cheap electronic funds transfers to individuals and sma ll firms. This paper examines how digital money affects the demand for money and bow this process, in turn, affects the demand for reserves, monetary control, and the monetary transmission mechanism.