We study the incentives of participants in a real-time gross settlement system with and without the addition of a liquidity-saving mechanism (queue). Participants in our model face a liquidity shock and different costs for delaying payments. They trade off the cost of delaying a payment against the cost of borrowing liquidity from the central bank. The heterogeneity of participants in our model gives rise to a rich set of strategic interactions. The main contribution of our paper is to show that the design of a liquidity-saving mechanism has important implications for welfare, even in the absence of netting. In particular, we find that parameters will determine whether the addition of a liquidity-saving mechanism increases or decreases welfare.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.newyorkfed.org/
More information through EDIRC
|Order Information:|| Web: http://www.ny.frb.org/rmaghome/staff_rp/ Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Angelini, Paolo, 1998. "An analysis of competitive externalities in gross settlement systems," Journal of Banking & Finance, Elsevier, vol. 22(1), pages 1-18, January.
- Antoine Martin & James McAndrews, 2007.
282, Federal Reserve Bank of New York.
- Bech, Morten L. & Garratt, Rod, 2001.
"The Intraday Liquidity Management Game,"
University of California at Santa Barbara, Economics Working Paper Series
qt0m6035wg, Department of Economics, UC Santa Barbara.
- Kahn, Charles M. & Roberds, William, 2001.
"The CLS bank: a solution to the risks of international payments settlement?,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 54(1), pages 191-226, June.
- Charles M. Kahn & William Roberds, 2000. "The CLS Bank: a solution to the risks of international payments settlement?," Working Paper 2000-15, Federal Reserve Bank of Atlanta.
- Angelini, Paolo, 2000. "Are Banks Risk Averse? Intraday Timing of Operations in the Interbank Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 54-73, February.
- Kurt Johnson & James J. McAndrews & Kimmo Soramaki, 2004. "Economizing on liquidity with deferred settlement mechanisms," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 51-72.
- Angelini, Paolo, 2000. "Erratum [Are Banks Risk Averse? Intraday Timing of Operations in the Interbank Market]," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 442, August.
- Matthew Willison, 2005. "Real-Time Gross Settlement and hybrid payment systems: a comparison," Bank of England working papers 252, Bank of England.
When requesting a correction, please mention this item's handle: RePEc:fip:fednsr:282. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Farber)
If references are entirely missing, you can add them using this form.