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Central Banking in a Monetary Theory of Production: The Economics of Payment Finality from a Circular-Flow Perspective

In: The Monetary Theory of Production

Author

Listed:
  • Sergio Rossi

Abstract

Payment finality — that is, ‘the discharge of an obligation by a transfer of funds and a transfer of securities that have become irrevocable and unconditional’ (Committee on Payment and Settlement Systems, 2003a, p. 496) — is crucial for the orderly working of modern economic systems. As a matter of fact, monetary transactions are the backbone of production and exchange, national as well as international. Payments equivalent to a country’s annual GDP are presently made over a few working days within any national economy. The large volume and scope of payments at the time of writing imply that problems in their settlement could affect the financial sector and even the economy as a whole. Further, the implementation and transmission mechanism of a central bank’s monetary policy also depends on the smooth functioning of domestic payment systems, and hence the issue of payment finality is of both private and public concern.

Suggested Citation

  • Sergio Rossi, 2005. "Central Banking in a Monetary Theory of Production: The Economics of Payment Finality from a Circular-Flow Perspective," Palgrave Macmillan Books, in: Giuseppe Fontana & Riccardo Realfonzo (ed.), The Monetary Theory of Production, chapter 9, pages 139-151, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-52307-4_10
    DOI: 10.1057/9780230523074_10
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    Cited by:

    1. Louis-Philippe Rochon & Sergio Rossi, 2011. "Monetary Policy Without Reserve Requirements: Central Bank Money as Means of Final Payment on the Interbank Market," Chapters, in: Claude Gnos & Louis-Philippe Rochon (ed.), Credit, Money and Macroeconomic Policy, chapter 6, Edward Elgar Publishing.

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