Electronic money: new day or false dawn?

The era of electronic money will soon be upon us, What will the advent of e lectronic money mean for the capacity of central banks to sustain price sta bility and promote growth? This article begins with a basic primer on the e ssential characteristics of electronic money what it is, how it operates, a nd what it is likely to look like in the future. The rise of electronic mon ey, it is clear, is no anomaly in historical terms and indeed may be regard ed as an entirely natural development in the context of today's rapidly glo balizing world economy. Analysis suggests that the challenge of e-money dif fers significantly depending on what countries we are talking about. In the many economies around the world where central bankers are already experien cing increased difficulty in controlling monetary aggregates, owing to acce lerating cross-border competition among currencies, the main impact of elec tronic money will be simply to add to the intensity of that competition. By contrast, in the traditional reserve centres-the US, 'Euroland' (home of t he new euro), and Japan-the threat to state power appears distinctly greate r and will demand real adjustments by policymakers.