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An agent-based model of payment systems

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  • Galbiati, Marco
  • Soramäki, Kimmo

Abstract

We lay out and simulate a multi-agent, multi-period model of an RTGS payment system. At the beginning of the day, banks choose how much costly liquidity to allocate to the settlement process. Then, they use it to execute an exogenous, random stream of payment orders. If a bank's liquidity stock is depleted, payments are queued until new liquidity arrives from other banks, imposing costs on the delaying bank. We study the equilibrium level of liquidity posted in the system, performing some comparative statics and obtaining insights on the efficiency of alternative system configurations.

Suggested Citation

  • Galbiati, Marco & Soramäki, Kimmo, 2011. "An agent-based model of payment systems," Journal of Economic Dynamics and Control, Elsevier, vol. 35(6), pages 859-875, June.
    • Handle: RePEc:eee:dyncon:v:35:y:2011:i:6:p:859-875
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    More about this item

    Keywords

    Payment systems Liquidity RTGS Agent-based modelling Learning Fictitious play;

    JEL classification:

    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other

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