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Payments Settlement: Tiering in Private and Public Systems

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  • CHARLES M. KAHN
  • WILLIAM ROBERDS

Abstract

What are the benefits provided by a payment system? What are the trade-offs 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 that 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.). Copyright (c) 2009 The Ohio State University No claim to original US government works.

Suggested Citation

  • Charles M. Kahn & William Roberds, 2009. "Payments Settlement: Tiering in Private and Public Systems," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(5), pages 855-884, August.
  • Handle: RePEc:mcb:jmoncb:v:41:y:2009:i:5:p:855-884
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    1. Lacker, Jeffrey M., 2004. "Payment system disruptions and the federal reserve following September 11, 2001," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 935-965, July.
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    Cited by:

    1. Hiroshi Fujiki, 2013. "Policy Measures to Alleviate Foreign Currency Liquidity Shortages under Aggregate Risk with Moral Hazard," The Japanese Economic Review, Japanese Economic Association, vol. 64(4), pages 504-536, December.
    2. Tomura, Hajime, 2018. "Payment instruments and collateral in the interbank payment system," Journal of Economic Theory, Elsevier, vol. 178(C), pages 82-104.
    3. Craig, Ben & von Peter, Goetz, 2014. "Interbank tiering and money center banks," Journal of Financial Intermediation, Elsevier, vol. 23(3), pages 322-347.
    4. Asaf Bernstein & Eric Hughson & Marc D. Weidenmier, 2014. "Counterparty Risk and the Establishment of the New York Stock Exchange Clearinghouse," NBER Working Papers 20459, National Bureau of Economic Research, Inc.
    5. Benos, Evangelos & Ferrara, Gerardo & Gurrola-Perez, Pedro, 2017. "The impact of de-tiering in the United Kingdom’s large-value payment system," Bank of England working papers 676, Bank of England.
    6. Ana Lasaosa & Merxe Tudela, 2008. "Risks and efficiency gains of a tiered structure in large-value payments: a simulation approach," Bank of England working papers 337, Bank of England.
    7. Robert Arculus & Jennifer Hancock & Greg Moran, 2012. "The Impact of Payment System Design on Tiering Incentives," RBA Research Discussion Papers rdp2012-06, Reserve Bank of Australia.
    8. Christine Parlour, 2017. "Making Money: Commercial Banks, Liquidity Transformation and the Payment System," 2017 Meeting Papers 388, Society for Economic Dynamics.
    9. Carlos A. Arango & Freddy H. Cepeda, 2016. "Non-monotonic Tradeoffs of Tiering in a Large Value Payment System," Borradores de Economia 946, Banco de la Republica de Colombia.

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