Money and Debt in the Structure of Payments
AbstractFreeman (1996) formulates a model in which payment arrangements based on intermediated debt that is settled using money can achieve higher welfare than direct money payment achieves. Freeman finds that a monetary authority can sometimes further improve welfare, and achieve efficiency, by participating in a secondary market for debt. The main result of this paper is that a private intermediary can also achieve efficiency by means of novation and substitution, a contractual device widely used by clearinghouses. The features of institutional governance required for either a central bank or a clearinghouse to achieve efficiency, particularly features related to ``central-bank independence,'' are discussed informally.
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Bibliographic InfoPaper provided by EconWPA in its series Macroeconomics with number 9609002.
Length: 23 pages
Date of creation: 09 Sep 1996
Date of revision: 09 Sep 1996
Note: 23 pages, LaTeX.
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Other versions of this item:
- Green, Edward-J, 1997. "Money and Debt in the Structure of Payments," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 15(1), pages 63-87, May.
- Edward J. Green, 1999. "Money and debt in the structure of payments," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 13-29.
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- G20 - Financial Economics - - Financial Institutions and Services - - - General
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