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The Philippine Payment System: Efficiency and Implications for the Conduct of Monetary Policy

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  • Lamberte, Mario B.

Abstract

In a modern economy, the payment system is a major component of the country’s infrastructure system. Indeed, no country nowadays can afford to take its payment system for granted. Advances in information technology and changes in laws, institutions and regulations in some countries have encouraged the emergence of new payment instruments as well as the delivery and processing arrangements for small and large value, time-critical payments. With e-commerce now in the mainstream of economic activities, we can therefore expect more major changes in the payment systems worldwide in the next five years than we have in the last five decades. Obviously, the Philippines cannot escape from this sea change. This paper discusses key operational concepts involved in a payment system and describes the emerging payment systems in industrialized countries. This gives developing countries, like the Philippines, a preview of the likely evolution of their payment systems in the next few years as they deepen the integration of their economies with the rest of the world. The paper gives a detailed description of the existing payment system in the Philippines and discusses innovations in payments media, especially noncash payment instruments, and facilities for the clearing and settlement of payments. Areas for improving the efficiency and reducing risks in existing payment system have been identified. Developments in the payment system have implications for the conduct of monetary policy. The second to the last section of this paper, therefore, deals with this issue. In particular, it discusses specific payment system innovations, such as the switch to RTGS system and use of electronic payments media, that can enhance or attenuate the effectiveness of traditional monetary tools. The last section presents some recommendations.

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Bibliographic Info

Paper provided by Philippine Institute for Development Studies in its series Discussion Papers with number DP 2001-20.

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Length: 128
Date of creation: 2001
Date of revision:
Handle: RePEc:phd:dpaper:dp_2001-20

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Related research

Keywords: seigniorage; payment system; electronic payment system; credit transfer; debit transfer; electronic money; transmission mechanism; cheque clearing;

References

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  1. Humphrey, D.B., 1995. "Payment Systems. Principles, Practice and Improvements," Papers 260, World Bank - Technical Papers.
  2. Charles Goodhart, 2000. "Can Central Banking Survive the IT Revolution?," FMG Special Papers sp125, Financial Markets Group.
  3. Stephen G. Cecchetti, 1995. "Distinguishing theories of the monetary transmission mechanism," Proceedings, Federal Reserve Bank of St. Louis, issue May, pages 83-97.
  4. Benjamin M. Friedman, 1999. "The Future of Monetary Policy: The Central Bank as an Army With Only a Signal Corps," NBER Working Papers 7420, National Bureau of Economic Research, Inc.
  5. Freedman, Charles, 2000. "Monetary Policy Implementation: Past, Present and Future--Will Electronic Money Lead to the Eventual Demise of Central Banking?," International Finance, Wiley Blackwell, vol. 3(2), pages 211-27, July.
  6. Lamberte, Mario B., 1999. "A Second Look at Credit Crunch: The Philippine Case," Discussion Papers DP 1999-23, Philippine Institute for Development Studies.
  7. Listfield, Robert & Montes-Negret, Fernando, 1994. "Modernizing payment systems in emerging economies," Policy Research Working Paper Series 1336, The World Bank.
  8. Michael Woodford, 2000. "Monetary Policy in a World Without Money," NBER Working Papers 7853, National Bureau of Economic Research, Inc.
  9. Alain Ize & Arto Kovanen & Timo Henckel, 1999. "Central Banking without Central Bank Money," IMF Working Papers 99/92, International Monetary Fund.
  10. Ben S. Bernanke, 1993. "Credit in the macroeconomy," Quarterly Review, Federal Reserve Bank of New York, issue Spr, pages 50-70.
  11. Goodhart, Charles A E, 2000. "Can Central Banking Survive the IT Revolution?," International Finance, Wiley Blackwell, vol. 3(2), pages 189-209, July.
  12. Frederic S. Mishkin, 1996. "The Channels of Monetary Transmission: Lessons for Monetary Policy," NBER Working Papers 5464, National Bureau of Economic Research, Inc.
  13. David Humphrey & Moshe Kim & Bent Vale, 1998. "Realizing the gains from electronic payments: costs, pricing, and payment choice," Proceedings 586, Federal Reserve Bank of Chicago.
  14. Friedman, Benjamin M, 1999. "The Future of Monetary Policy: The Central Bank as an Army with Only a Signal Corps?," International Finance, Wiley Blackwell, vol. 2(3), pages 321-38, November.
  15. Yap, Josef T., 2001. "Dollarization: Concepts and Implications for Monetary and Exchange Rate Policy in the Philippines," Discussion Papers DP 2001-03, Philippine Institute for Development Studies.
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