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Money, payments systems, limited participation, and central banking

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  • Choi, Hyung Sun

Abstract

A limited participation model is constructed to capture the role of a centralized payments system in conducting central bank’s policies. The government controls a money stock through the management of collateral requirements for the payments system as payment policy and open market operations as monetary policy. In equilibrium, due to limited participation, monetary policy whose effects are asymmetric across economic individuals may deteriorate some individual welfare. However, payment policy may wash out this distortion through an adjustment in the choice of credit-settlement types without deteriorating any individual welfare.

Suggested Citation

  • Choi, Hyung Sun, 2023. "Money, payments systems, limited participation, and central banking," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:ecofin:v:64:y:2023:i:c:s1062940822002091
    DOI: 10.1016/j.najef.2022.101874
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    References listed on IDEAS

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    1. Choi, Hyung Sun, 2011. "Money, Credit, And Limited Participation," Macroeconomic Dynamics, Cambridge University Press, vol. 15(5), pages 616-655, November.
    2. Stephen D. Williamson, 2006. "Search, Limited Participation, And Monetary Policy ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 107-128, February.
    3. Stephen D. Williamson, 2009. "Transactions, Credit, and Central Banking in a Model of Segmented Markets," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(2), pages 344-362, April.
    4. Charles Kahn, 2013. "Private payment systems, collateral, and interest rates," Annals of Finance, Springer, vol. 9(1), pages 83-114, February.
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    More about this item

    Keywords

    Money; Payments systems; Limited participation; Central banking;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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