Real-time gross settlement and the costs of immediacy
AbstractUsing a neoclassical monetary model, we investigate the welfare cost of a payment system that operates as a real-time gross settlement (RTGS) system. We illustrate how the cost of such systems does not ultimately derive from factors such as "payments gridlock" but instead from the credit constraints imposed by RTGS. We also investigate the welfare consequences of various approaches to the allocation of daylight credit by central banks. The two most popular approaches, collateralization and charging an administered intraday interest rate, are shown to be effective along some dimensions but flawed in others.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 98-21.
Date of creation: 1999
Date of revision:
Publication status: Published in Journal of Monetary Economics, April 2001
Other versions of this item:
- Kahn, Charles M. & Roberds, William, 2001. "Real-time gross settlement and the costs of immediacy," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 299-319, April.
- NEP-ALL-1999-01-25 (All new papers)
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