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Optimal use of scale economies in the Federal Reserve’s currency infrastructure

Author

Listed:
  • Paul W. Bauer
  • Apostolos Burnetas
  • Viswanath CVSA
  • Gregory Reynolds

Abstract

Could the Federal Reserve lower its overall currency processing costs by reallocating its high-speed currency sorting volume? Given estimates of currency shipping costs and scale economies for high-speed sorting, the authors? model minimizes costs by optimal distribution of sorting volumes across possible processing sites, while maintaining levels of service to depository institutions. Their key findings are that most of the potential savings can be achieved without closing any existing processing sites and that locating a new site in Phoenix would help lower System processing costs.

Suggested Citation

  • Paul W. Bauer & Apostolos Burnetas & Viswanath CVSA & Gregory Reynolds, 2000. "Optimal use of scale economies in the Federal Reserve’s currency infrastructure," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 13-27.
    • Handle: RePEc:fip:fedcer:y:2000:i:qiii:p:13-27
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    References listed on IDEAS

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    1. Paul W. Bauer, 1998. "Currency: time for change?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Oct.
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