Central Banking and the Economics of Information

  • Edward J. Green


Advances in the economic management of information have worked pervasive change throughout the world economy and its financial system. With respect to one kind of advance, embodied in electronic computing and communications, this change has been highly visible. Another kind of advance, in the design of institutions to function well in private-information environments, has been equally significant. In this paper, I examine how both types of advance affect a key sector of the financial system: central banking. This examination focuses on three areas:
  • Implications of innovation induced by information technology in payment arrangements for monetary policy objectives;

  • Operational and design requirements for electronic information systems to ensure the integrity and security of the financial system (including central bank settlement of large-value payments); and

  • Meaning of, and requirements for, transparency of central bank decision-making.


Monetary Policy Central Bank Financial System Federal Reserve Central Bank Independence 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Accredited Standards Committee X9 on Financial Services (1998), ANSI Standard X9.52, American National Standards Institute.Google Scholar
  2. Accredited Standards Committee X9 on Financial Services (1999), Technical Guideline TG-25–1999, American National Standards Institute.Google Scholar
  3. Aiyagari, R., R.A. Braun, and Z. Eckstein (1998), Transaction Services, Inflation and Welfare, Journal of Political Economy 106, 1274–1301.CrossRefGoogle Scholar
  4. Andersen, L. and K. Carlson (1974), The St. Louis Model Revisited, International Economic Review 15, 305–327.CrossRefGoogle Scholar
  5. Arrow, K.J. (1974), The Limits of Organization (W. W. Norton, New York).Google Scholar
  6. Bank for International Settlements (1996), Implications for Central Banks of the Development of Electronic Money.Google Scholar
  7. Bank for International Settlements (1998), Reducing Foreign Exchange Settlement Risk: A Progress Report.Google Scholar
  8. Canzoneri, M.B. (1985), Monetary Policy Games and the Role of Private Information, American Economic Review 75, 1056–1070.Google Scholar
  9. Chicago Board of Trade (1999), press release, August 17,
  10. Cukierman, A. and A.H. Meltzer (1986), A Theory of Ambiguity, Credibility, and Inflation Under Discretion and Asymmetric Information, Econometrica 54, 1099–1128.CrossRefGoogle Scholar
  11. De Santis, V. (1998), CHIPS Update, presentation to the Money Transfer ‘88 conference, Bank Administration Institute.Google Scholar
  12. Deaton, A. and J. Muellbauer (1980), Economics and Consumer Behaviour ( Cambridge University Press, Cambridge).CrossRefGoogle Scholar
  13. Faust, J. and L.E.O. Svensson (1998) Transparency and Credibility: Monetary Policy with Unobservable Goals, International Finance Discussion Paper 605 ( Board of Governors of the Federal Reserve System, Washington, D.C. ).Google Scholar
  14. Feyerabend, P. (1978), Against Method ( Verso Editions, London).Google Scholar
  15. Freeman, S. (1996a), Clearinghouse Banks and Banknote Over-issue, Journal of Monetary Economics 38, 101–115.CrossRefGoogle Scholar
  16. Freeman, S. (1996b), The Payments System, Liquidity, and Rediscounting, American Economic Review 86, 1126–1138.Google Scholar
  17. Freeman, S. (1999), Rediscounting under Aggregate Risk, Journal of Monetary Economics 43, 197–216.CrossRefGoogle Scholar
  18. Friedman, B. (1999), The Future of Monetary Policy: The Central Bank as an Army with only a Signal Corps?, Working Paper No. 7420, National Bureau of Economic Research, Cambridge, USA.Google Scholar
  19. Gavin, W.T. (special issue ed.) (1991), Price Stability: A Conference Sponsored by the Federal Reserve Bank of Cleveland, November 8–10, 1990, Journal of Money, Credit and Banking 23, 433–631.Google Scholar
  20. Gilbert, R.A. and B. Summers (1996), Clearing and Settlement of U.S. Dollar Payments: Back to the Future? Federal Reserve Bank of St. Louis Review 78, 3–27.Google Scholar
  21. Goodhart, C. (2000), Can Central Banking Survive the IT Revolution?, Special Paper sp0125, Financial Market Group London School of Economics, London).Google Scholar
  22. Green, E.J. (1997), Money and Debt in the Structure of Payments, Bank of Japan Monetary and Economic Studies 15, 63–87 (Reprinted in Federal Reserve Bank of Minneapolis Quarterly Review 23, 1999, 13–29.)Google Scholar
  23. King, M. (1999), Challenges for Monetary Policy, New and Old, presentation to the 1999 Symposium of the Federal Reserve Bank of Kansas City.Google Scholar
  24. Lucas, R.E. Jr. and N.L. Stokey (1983), Optimal Fiscal and Monetary Policy in an Economy without Capital, Journal of Monetary Economics 12, 55–93.CrossRefGoogle Scholar
  25. Marjanovic, S. (1998), N.Y. Clearing House in Final Leg of Overhaul, American Banker 163, 1Google Scholar
  26. Miller, P.J. (ed.) (1994), The Rational Expectations Revolution: Readings from the Front Line ( MIT Press, Cambridge ).Google Scholar
  27. National Institute of Standards and Technology (1999), Data Encryption Standard (DES), U.S. Department of Commerce FIPS-46–3.Google Scholar
  28. Schreft, S.L. (1992), Transaction Costs and the Use of Cash and Credit, Economic Theory 2, 283–296.CrossRefGoogle Scholar
  29. Summers, B. (1999), Integrity and Trust in Electronic Banking, presentation to the 1999 Software Engineering Symposium of the Carnegie Mellon Software Engineering Institute.Google Scholar
  30. Söderlind, P. and L. Svensson (1997), New Techniques to Extract Market Expectations from Financial Instruments, Journal of Monetary Economics 40, 383–429.CrossRefGoogle Scholar
  31. U.S. Congress (1986), The Federal Reserve Bank of New York Discount Window Advance of $22.6 Billion Extended to the Bank of New York, Serial No. 99–65.Google Scholar
  32. Wallace, N. (1984), Some of the Choices for Monetary Policy, Federal Reserve Bank of Minneapolis Quarterly Review 8, 15–24. (Reprinted in Miller, 1994.)Google Scholar
  33. Wallace, N. (1986), The Impact of New Payment Technologies: A Macro View, in: C. Lawrence and R.P. Shay (ed.), Technological Innovation, Regulation, and the Monetary Economy (Harper and Row, Cambridge, USA ) 201–206.Google Scholar

Copyright information

© Springer Science+Business Media New York 2001

Authors and Affiliations

  • Edward J. Green
    • 1
  1. 1.Federal Reserve Bank of ChicagoUSA

Personalised recommendations