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Payments Settlement under Limited Enforcement: Private versus Public Systems

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  • William Roberds
  • Charles M. Kahn

Abstract

What are the benefits provided by a payment system? What are the tradeoffs in public versus private payment systems and in restricted versus open payments arrangements? Modern payment systems encompass a variety of institutional designs with varying degrees of counterparty protection. We develop a framework which allows for an examination and comparison of payment systems, and specification of conditions leading to their adoption. We relate these conditions to the design of present large-value payment systems (Fedwire, CHIPS, Target, etc.)

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 North American Winter Meetings with number 13.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nawm04:13

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Keywords: Payment systems; limited enforcement; settlement risk;

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References

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  1. X. Freixas & B. Parigi & J-C. Rochet, 2000. "Systemic Risk, Interbank Relations and Liquidity Provision by theCentral Bank," DNB Staff Reports (discontinued), Netherlands Central Bank 47, Netherlands Central Bank.
  2. Hiroshi Fujiki & Edward J. Green & Akira Yamazaki, 1999. "Sharing the risk of settlement failure," Working Papers, Federal Reserve Bank of Minneapolis 594, Federal Reserve Bank of Minneapolis.
  3. Jean-Charles Rochet & Jean Tirole, 1996. "Interbank lending and systemic risk," Proceedings, Board of Governors of the Federal Reserve System (U.S.), Board of Governors of the Federal Reserve System (U.S.), pages 733-765.
  4. Kocherlakota Narayana R, 2001. "Risky Collateral and Deposit Insurance," The B.E. Journal of Macroeconomics, De Gruyter, De Gruyter, vol. 1(1), pages 1-20, February.
  5. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 51(3), pages 393-414, July.
  6. Cornelia Holthausen & Thomas R¯nde, 2002. "Regulating Access to International Large-Value Payment Systems," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 15(5), pages 1561-1586.
  7. Thorsten V. Koppl & James MacGee, 2001. "Limited enforcement and efficient interbank arrangements," Working Papers, Federal Reserve Bank of Minneapolis 608, Federal Reserve Bank of Minneapolis.
  8. Ruilin Zhou, 2000. "Understanding intraday credit in large-value payment systems," Economic Perspectives, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Q III, pages 29-44.
  9. Freeman, Scott, 1996. "The Payments System, Liquidity, and Rediscounting," American Economic Review, American Economic Association, American Economic Association, vol. 86(5), pages 1126-38, December.
  10. Stacy Panigay Coleman, 2002. "The evolution of the Federal Reserve's intraday credit policies," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), Board of Governors of the Federal Reserve System (U.S.), issue Feb, pages 67-84.
  11. Woodford, Michael, 1990. "Public Debt as Private Liquidity," American Economic Review, American Economic Association, American Economic Association, vol. 80(2), pages 382-88, May.
  12. James McAndrews & Samira Rajan, 2000. "The timing and funding of Fedwire funds transfers," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue Jul, pages 17-32.
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Cited by:
  1. Jonathan Chiu & Alexandra Lai, 2007. "Modelling Payments Systems: A Review of the Literature," Working Papers, Bank of Canada 07-28, Bank of Canada.
  2. James Chapman & Jonathan Chiu & Miguel Molico, 2013. "A Model of Tiered Settlement Networks," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 45(2-3), pages 327-347, 03.
  3. Holthausen, Cornelia & Monnet, Cyril, 2003. "Money and payments: a modern perspective," Working Paper Series, European Central Bank 0245, European Central Bank.

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