A Model of Tiered Settlement Networks
This paper develops a model of settlement system to study the endogenous structure of settlement networks, and the welfare consequences of clearing agent failure. The equilibrium degree of tiering is endogenously determined by the cost structure and the information structure. The degree of tiering is decreasing in the fixed cost of operating the second-tier network and the availability of public credit history. Furthermore, the welfare effects of clearing agent failure can be decomposed into operational inefficiency and the loss of private information.
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Volume (Year): 45 (2013)
Issue (Month): 2-3 (03)
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- Alexandra Lai & Nikil Chande & Sean O'Connor, 2006.
"Credit in a Tiered Payments System,"
06-36, Bank of Canada.
- James T. E. Chapman & Antoine Martin, 2007.
"Rediscounting Under Aggregate Risk with Moral Hazard,"
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"Payments Settlement under Limited Enforcement: Private versus Public Systems,"
Econometric Society 2004 North American Winter Meetings
13, Econometric Society.
- Charles M. Kahn & William Roberds, 2002. "Payments settlement under limited enforcement: Private versus public systems," Working Paper 2002-33, Federal Reserve Bank of Atlanta.
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