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Regulating Check Use in Turkey

Author

Listed:
  • Semih Tumen

Abstract

This paper develops a simple model of the market for checks in Turkey. The Central Bank controls the lump-sum amount that the drawee banks are legally responsible to pay per bad check. An increase in this amount is believed to support real economy. I show that banks will tend to restrict the quantity of checks when this responsibility is increased. A percentage point increase in banks' obligation per bad check could lead up to a 1.7 percent decline in the total supply of checks on the margin. This means that a rise in this obligation may harm the real economy rather than providing support.

Suggested Citation

  • Semih Tumen, 2012. "Regulating Check Use in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 12(1), pages 1-12.
  • Handle: RePEc:tcb:cebare:v:12:y:2012:i:1:p:1-12
    as

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    File URL: http://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Central+Bank+Review/2012/Volume+12-1/
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    References listed on IDEAS

    as
    1. McAndrews, James & Roberds, William, 1999. "A General Equilibrium Analysis of Check Float," Journal of Financial Intermediation, Elsevier, vol. 8(4), pages 353-377, October.
    2. Tumen, Semih, 2012. "Regulation and the market for checks," Economic Modelling, Elsevier, vol. 29(3), pages 858-867.
    3. Ricardo Lagos, 2006. "Inside and outside money," Staff Report 374, Federal Reserve Bank of Minneapolis.
    4. Ping He & Lixin Huang & Randall Wright, 2005. "Money And Banking In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 637-670, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Checks; Regulation; Monopoly; Heterogeneous preferences;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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