Private Money and the Central Banking

Abstract

The use of private money (i.e. store value cards) has been growing rapidly due to the quick growth in technological development over the past couple decades. The issuance and redemption of private money is difficult to track, causing the measurement of liquidity to be inaccurate. This creates problems for the central bank to conduct monetary policy. The purpose of this study was to find a model that examines how multiple means of payment coexist in transactions. Specifically, the conventional money multiplier will be revised by introducing private money.