Economic Effects of Digicash Use Extension with an Emphasis on Monetary Policies

Extended distribution of digicash has commercial, socio-economic as well as political effects. From the economic viewpoint, the most crucial effect of digicash use extension takes place on money supply, monetary policies and central bank. Because digicash is capable of being replaced by bank notes and the coins, it is possible that digicash gradually takes the place of the central bank money and therefore endangers monopolized state of the central bank in the areas such as monetary policy-making, banking supervision, payments system supervision, financial system stability and particularly its independence. This paper reviews the probable effects of digicash distribution on exchanges efficiency, financial intermediates, foreign exchange market, financial markets, money demand and especially monetary policy-marking. The consequences of digicash use extension effects on Iran's economy reveals that digicash distribution has very little impacts on volume of money, the central bank,s supervision autribution of digicash has very important role in the ways the digicash use extension affects the economy. In other words, if the central bank limits the distribution of digicash through using its instruments or if the central bank distributes the digicash itself, obviously, lots of the effects will not happen or they will be very limited.