Liquidity saving mechanisms
We study the incentives of participants in a real-time gross settlement with and without the addition of a liquidity saving mechanism. Participants in our model face a liquidity shock and different cost of delaying payments. They trade-off the cost of delaying a payment with 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. In particular, we find that adding one type of liquidity saving mechanism can either increase or decrease welfare depending on parameters.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.EconomicDynamics.org/society.htmEmail:
More information through EDIRC
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.:
- Bech, Morten L. & Garratt, Rod, 2003.
"The intraday liquidity management game,"
Journal of Economic Theory,
Elsevier, vol. 109(2), pages 198-219, April.
- 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.
- Jamie McAndrews & Antoine Martin, 2007.
"Liquidity saving mechanisms,"
2007 Meeting Papers
165, Society for Economic Dynamics.
- 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.
- Matthew Willison, 2005. "Real-Time Gross Settlement and hybrid payment systems: a comparison," Bank of England working papers 252, Bank of England.
- Charles M. Kahn & William Roberds, 2000.
"The CLS Bank: a solution to the risks of international payments settlement?,"
2000-15, Federal Reserve Bank of Atlanta.
- 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.
- 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.
- 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.
- Angelini, Paolo, 1998. "An analysis of competitive externalities in gross settlement systems," Journal of Banking & Finance, Elsevier, vol. 22(1), pages 1-18, January.
When requesting a correction, please mention this item's handle: RePEc:red:sed007:165. 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: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.