Financial innovation and monetary policy: Challenges and prospects

Please note: Each In-Depth Analysis is assigned a DOI (digital object identifier), which is a safe and long term way of ensuring a hyperlink to the full text of this report. However, when ESO creates this record, on occasion the DOI still has not been activated by the EU Bookshop. If you find the source url hyperlink does not work please use the alternative location hyperlink listed as a related url.This paper describes recent technological developments and their possible impact on monetary policy and financial stability. The authors find that privately issued digital currencies could transform the present financial system substantially, if they gain considerable market shares, while there may be a benefit from currency competition in disciplining monetary policy. The introduction of a central bank digital currency would also challenge the present fractional reserve system at its core and could finally lead to a more stable financial system.

European Parliament: European Parliamentary Research Service: In-Depth Analysis, May 2017: Financial innovation and monetary policy: Challenges and prospects http://www.europarl.europa.eu/RegData/etudes/IDAN/2017/602045/IPOL_IDA(2017)602045_EN.pdf

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