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A dynamic model of settlement

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Author Info
Koeppl, Thorsten
Monnet, Cyril
Temzelides, Ted

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Abstract

We investigate the role of settlement in a dynamic model of a payment system where the ability of participants to perform certain welfare-improving transactions is subject to random and unobservable shocks. In the absence of settlement, the full information first-best allocation cannot be supported due to incentive constraints. In contrast, this allocation can be supported if settlement is introduced, provided that it takes place with a sufficiently high frequency.

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File URL: http://www.sciencedirect.com/science/article/B6WJ3-4MGVPN0-1/2/b034798b498807d6a672877c11347609
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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 142 (2008)
Issue (Month): 1 (September)
Pages: 233-246
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Handle: RePEc:eee:jetheo:v:142:y:2008:i:1:p:233-246

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  3. Levine, David K., 1991. "Asset trading mechanisms and expansionary policy," Journal of Economic Theory, Elsevier, vol. 54(1), pages 148-164, June. [Downloadable!] (restricted)
  4. Shouyong Shi, 1997. "A Divisible Search Model of Fiat Money," Econometrica, Econometric Society, vol. 65(1), pages 75-102, January.
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  5. S. Rao Aiyagari & Stephen D. Williamson, 1999. "Credit in a Random Matching Model with Private Information," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 36-64, January. [Downloadable!] (restricted)
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  6. Spear, Stephen E & Srivastava, Sanjay, 1987. "On Repeated Moral Hazard with Discounting," Review of Economic Studies, Blackwell Publishing, vol. 54(4), pages 599-617, October. [Downloadable!] (restricted)
  7. Ricardo Lagos & Randall Wright, 2002. "A unified framework for monetary theory and policy analysis," Working Paper 0211, Federal Reserve Bank of Cleveland. [Downloadable!]
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  12. Temzelides, Ted & Williamson, Stephen D., 2001. "Payments Systems Design in Deterministic and Private Information Environments," Journal of Economic Theory, Elsevier, vol. 99(1-2), pages 297-326, July. [Downloadable!] (restricted)
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  14. Aiyagari, S. Rao & Williamson, Stephen D., 2000. "Money and Dynamic Credit Arrangements with Private Information," Journal of Economic Theory, Elsevier, vol. 91(2), pages 248-279, April. [Downloadable!] (restricted)
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  15. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August. [Downloadable!] (restricted)
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  17. Kahn, Charles M. & Roberds, William, 2007. "Transferability, finality, and debt settlement," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 955-978, May. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Cyril Monnet & William Roberds, 2007. "Optimal pricing of payment services when cash is an alternative," Working Papers 07-26, Federal Reserve Bank of Philadelphia. [Downloadable!]
  2. Thorsten Koeppl & Cyril Monnet & Ted Temzelides, 2007. "A dynamic model of the payment system," Working Papers 07-22, Federal Reserve Bank of Philadelphia. [Downloadable!]
  3. Aleksander Berentsen & Cyril Monnet, 2007. "Monetary Policy in a Channel System," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  4. Jonathan Chiu & Alexandra Lai, 2007. "Modelling Payments Systems: A Review of the Literature," Working Papers 07-28, Bank of Canada. [Downloadable!]
  5. Cyril Monnet & William Roberds, 2006. "Credit and the no-surcharge rule," Working Paper 2006-25, Federal Reserve Bank of Atlanta. [Downloadable!]
  6. Antoine Martin & Cyril Monnet, 2008. "Monetary policy implementation frameworks: a comparative analysis," Staff Reports 313, Federal Reserve Bank of New York. [Downloadable!]
  7. Antoine Martin & Michael Orlando & David Skeie, 2008. "Payment networks in a search model of money," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 104-132, January. [Downloadable!] (restricted)
    Other versions:
  8. Thor Koeppl & Cyril Monnet & Ted Temzelides, 2007. "Payments and Mechanism Design," Working Papers 1124, Queen's University, Department of Economics. [Downloadable!]
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