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CEPS Project

Financial innovation and monetary policy: Challenges and prospects

Financial innovation and monetary policy

Unit Involved

Economic Policy

Financial innovation seems to have had little impact on the oldest medium of transaction, namely cash. The ratio of currency in circulation to GDP has increased in most countries, independently of the continuing spread of cashless transactions. Currency is part of the monetary base. Its increase thus leads to an automatic increase in central banks’ balance sheets. This becomes relevant when the size of a central bank’s balance sheet becomes a policy instrument. Taking account of the increase in cash holdings can lead to a different view of the monetary policy stance over longer periods of time. Holding the size of the overall balance sheet constant is equivalent to a gradual exit when currency holdings continue to increase.

This project was awarded under the Framework Service Contract for the provision of external expertise in the field of monetary and economic affairs (Monetary dialogues) (IP/A/ECONMD/FWC/2014-026/C6) with the European Parliament. The full list of CEPS’ Framework Contracts is available here.

CEPS Project

Project Details

Economic Policy


Financial innovation and monetary policy: Challenges and prospects

Financial innovation and monetary policy

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This project was funded by the European Parliament (DG for Internal Policies of the Union).
Contact
Daniel Gros Daniel Gros
Daniel Gros
+32 (0)2 229 39 38
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Publications

Here are the publications published for this project