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Cambridge Journal of Economics Advance Access originally published online on August 8, 2005
Cambridge Journal of Economics 2006 30(2):293-306; doi:10.1093/cje/bei060
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© The Author 2005. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Article

Doing without money: a critical assessment of Woodford's analysis

C. Rogers*

* School of Economics, University of Adelaide

Address for correspondence: School of Economics, University of Adelaide North Terrace, Adelaide, Australia 5005; email: colin.rogers{at}adelaide.edu.au

Abstract

Woodford employs an inter-temporal general equilibrium model to examine the properties of the monetary system as it evolves from the use of a physical medium of exchange to an electronic medium. He presents a structure in which cash as a means of payment can be made to vanish at the limit, but where he claims the price level remains determinate. It is shown that Woodford's analysis involves fundamental but still widespread conceptual and methodological errors. His general equilibrium model does not map into the world of electronic money, and his analysis has no implications for the art of central banking.

Key Words: Electronic money • Cashless limit • Hahn property • Accounting systems of exchange

JEL classifications: B40, E40, E42, E50

Manuscript received July 26, 2003; final version received November 9, 2004.


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