IMF Institute Six Puzzles in Electronic Money and Banking

Abstract

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. The literature on the economic effects of electronic money and banking lacks organization and a common analytical framework. This paper identifies the main issues raised by e-money and e-banking and presents them as six puzzles. Our solutions to the puzzles build a framework for analyzing the effects of e-money and e-banking, and for choosing the appropriate approach to regulating electronic money and banking. Although electronic money and banking will likely not fulfill the more dire predictions in the literature, such as the possible loss of central banks ’ ability to control the money supply, they nonetheless wil