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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References listed on IDEAS
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- Charles M. Kahn & William Roberds, 2002.
"Payments settlement under limited enforcement: Private versus public systems,"
FRB Atlanta Working Paper
2002-33, Federal Reserve Bank of Atlanta.
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- James T. E. Chapman & Antoine Martin, 2007. "Rediscounting under aggregate risk with moral hazard," Staff Reports 296, Federal Reserve Bank of New York.
- James T. E. Chapman & Antoine Martin, 2007. "Rediscounting Under Aggregate Risk with Moral Hazard," Staff Working Papers 07-51, Bank of Canada.
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