Introduction to monetary and financial arrangements

Recent years have seen major innovations in the nature of monetary, banking , and payment arrangements. These innovations, which are certain to continu e into the foreseeable future. will have huge implications for the conduct of monetary policy. for the regulation of banking, and for the design of pa yment systems. Indeed, central banks now need to think about the conduct of monetary policy in environments where the evolution of banking and payment s systems already has implied and will continue to imply a declining demand for their liabilities. Central banks also need to think about the conduct of monetary policy in increasingly global markets and in a context where th e number of currencies is shrinking as different nations abandon their own monies in favor of the dollar or the euro. And, at least in the United Stat es, all legal impediments to the issue of currency substitutes by private a gents have been repealed. This has occurred at the same time that developme nts in communications and record-keeping technologies have made it feasible for agents to issue various forms of electronic currency substitutes. What would the widespread issue of private, possibly electronic Currency substi tutes imply for price level and interest rate determination or for the cond uct of monetary policy in general? In addition, the increasing frequency and severity of financial crises arou nd the globe and the increasing exposure of economies like the U.S. to exte rnal events raise issues about the appropriate roles for national central b anks and the appropriate roles for international agencies, like the IMF. An d recent changes in U.S. banking legislation will force a rethinking of how the supervision and regulation of the banking system should be conducted a nd of how far the "safety-net" created by deposit insurance provision and l ender of last resort services should be extended. These issues will become particularly vexing as the scope of activities conducted by "banks" increas es and as the notion of a "bank" becomes more amorphous. The papers in this issue are intended to provide frameworks for advancing r esearch on these and other topics. (C) 2001 Academic Press.