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(Real-)Time Is Money

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  • Christian Pfister

Abstract

In the age of high-frequency trading in financial markets and faster payment services in account-to-account (A2A) transactions of bank retail customers, it may seem odd that the shortest maturity that is traded in the money market is overnight. This situation reflects policies implemented by central banks, which provide banks with free intraday liquidity. Such policies are difficult to ground in theory and have limitations which central banks could remedy by conducting real-time monetary policies. The article details how, following that decision, central banks could adapt some features of their monetary policy operational frameworks and of their real-time gross settlement systems. In any case, the potential benefits of such a move should be carefully weighed against the costs for the central banks, financial intermediaries and society.

Suggested Citation

  • Christian Pfister, 2018. "(Real-)Time Is Money," Working papers 675, Banque de France.
    • Handle: RePEc:bfr:banfra:675
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    References listed on IDEAS

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    Cited by:

    1. Christian Pfister, 2019. "Central Bank Digital Currency:One, Two or None?," Working papers 732, Banque de France.
    2. Anastasia Melachrinos & Christian Pfister, 2020. "Stablecoins: A Brave New World?," Working papers 757, Banque de France.

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    More about this item

    Keywords

    Intraday liquidity; Real-time gross settlement systems; Monetary policy; Financial stability;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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