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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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  1. Holthausen, Cornelia & Rønde, Thomas, 2000. "Regulating access to international large-value payment systems," Working Paper Series 0022, European Central Bank.
  2. Thorsten V. Koppl & James MacGee, 2001. "Limited enforcement and efficient interbank arrangements," Working Papers 608, Federal Reserve Bank of Minneapolis.
  3. X. Freixas & B. Parigi & J-C. Rochet, 2000. "Systemic Risk, Interbank Relations and Liquidity Provision by theCentral Bank," DNB Staff Reports (discontinued) 47, Netherlands Central Bank.
  4. Narayana R. Kocherlakota, 2000. "Risky collateral and deposit insurance," Staff Report 274, Federal Reserve Bank of Minneapolis.
  5. Woodford, Michael, 1990. "Public Debt as Private Liquidity," American Economic Review, American Economic Association, vol. 80(2), pages 382-88, May.
  6. Ruilin Zhou, 2000. "Understanding intraday credit in large-value payment systems," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 29-44.
  7. 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.), issue Feb, pages 67-84.
  8. James McAndrews & Samira Rajan, 2000. "The timing and funding of Fedwire funds transfers," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 17-32.
  9. Rochet, Jean-Charles & Tirole, Jean, 1996. "Interbank Lending and Systemic Risk," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 733-62, November.
  10. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
  11. Hiroshi Fujiki & Edward J. Green & Akira Yamazaki, 1999. "Sharing the risk of settlement failure," Working Papers 594, Federal Reserve Bank of Minneapolis.
  12. Freeman, Scott, 1996. "The Payments System, Liquidity, and Rediscounting," American Economic Review, American Economic Association, vol. 86(5), pages 1126-38, December.
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Cited by:
  1. James Chapman & Jonathan Chiu & Miguel Molico, 2013. "A Model of Tiered Settlement Networks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(2-3), pages 327-347, 03.
  2. Holthausen, Cornelia & Monnet, Cyril, 2003. "Money and payments: a modern perspective," Working Paper Series 0245, European Central Bank.
  3. Jonathan Chiu & Alexandra Lai, 2007. "Modelling Payments Systems: A Review of the Literature," Working Papers 07-28, Bank of Canada.

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