Intraday two-part tariff in payment systems
AbstractThis paper studies the optimal intraday pricing in payment systems and its impact on banks’ payment behaviour and intraday liquidity management. A model is developed to compare the performance of two different mechanisms to reduce payment delay: a throughput guideline and a tariff that varies over time, and concludes that a linear time-varying tariff achieves a better outcome unless the payment system experiences a system-wide liquidity shock. We show that settlement delay can be socially efficient, contrary to general understanding of the literature, when it reduces the aggregate cost of liquidity. The theoretical model suggests that the tariff eliminates the inefficient settlement delay that does not contribute to lowering the cost, while leaving the socially efficient delay.
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Bibliographic InfoPaper provided by Bank of England in its series Bank of England working papers with number 428.
Length: 37 pages
Date of creation: 31 May 2011
Date of revision:
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Payment; RTGS; two-part tariff; throughput guideline;
Find related papers by JEL classification:
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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- Olivier Armantier & Jeffrey Arnold & James McAndrews, 2008. "Changes in the timing distribution of Fedwire funds transfers," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 83-112.
- Hitoshi Matsushima, 2003.
"Repeated Games with Private Monitoring: Two Players,"
CIRJE-F-242, CIRJE, Faculty of Economics, University of Tokyo.
- Hitoshi Matsushima, 2004. "Repeated Games with Private Monitoring: Two Players," Econometrica, Econometric Society, vol. 72(3), pages 823-852, 05.
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