Three essays on the impact of financial evolution on monetary policy

Technological developments in banking have driven changes in the traditional ways of creating and transacting financial claims. This research examines the implications of these changes for the "moneyness" of an economy and the effectiveness of monetary policy, with particular emphasis on Canada. We argue that the existence of cash in financial transactions and their associated clearing and settlements systems is neither necessary nor sufficient for either an economy to be considered "monetary" or a central bank's monetary policy to be effective. Contrary to the monetarists' conception of a monetary economy in which financial innovation is non-neutral, we demonstrate that financial innovation is in fact neutral when money is not.;The study develops Three Essays in the post-Keynesian tradition of endogenous money using standard neoclassical optimization techniques to examine the conditions under which financial innovations deliver effective monetary policy in a cashless but not moneyless world. The first essay examines the effectiveness of the real interest rate as a monetary policy tool in an electronic money environment; the second essay introduces a missing link into the monetary transmission mechanism; and the third essay explores the non-superneutrality of monetary policy in the contemporary environment. We conclude that despite a significant reduction in the use of cash, and an increased reliance on both electronic payments media and an electronic clearing and settlements system, monetary policy retains the potential to exert effective influence over the real economy when the real interest rate is used as the primary monetary policy instrument.