Showing 1 - 10 of 476
In this paper we consider the relative merits of net versus gross settlement of interbank payments. Net settlement economizes on the costs of holding non-interest-bearing reserves but increases moral hazard problems. The "put option" value of default under net settlement can also distort banks'...
Persistent link: https://www.econbiz.de/10010397416
We examine the question of whether transactable forms of privately issued, demandable debt are better used as "banknotes" or "checks." The distinction between the two is that a check must be redeemed by the issuing bank with each use, whereas a banknote can circulate. We find that the answer to...
Persistent link: https://www.econbiz.de/10010397423
What are the benefits provided by a payment system? What are the tradeoffs in public versus private payment systems and in restricted versus open payments arrangements? Modern payment systems encompass a variety of institutional designs with varying degrees of counterparty protection. We develop...
Persistent link: https://www.econbiz.de/10010397431
This paper investigates the question of why banks almost always settle payments in cash as opposed to debt. Our model suggests that adverse selection with respect to the quality of bank assets may be the primary motivation underlying this practice. Banks with higher-quality assets prefer not to...
Persistent link: https://www.econbiz.de/10010397433
Foreign exchange transactions are subject to a unique type of settlement risk. This risk ultimately stems from the difficulty of coordinating separate settlements in two different currencies. Settlement of foreign exchange transactions through the proposed CLS ("Continuous Linked Settlement")...
Persistent link: https://www.econbiz.de/10010397457
In this paper, we consider the costs and benefits of transactions privacy. In the environment we consider, privacy is the concealment of potentially useful information, but concealment also potentially bestows benefits. In some versions of the environment, the standard Coasian logic applies:...
Persistent link: https://www.econbiz.de/10010397483
Using a neoclassical monetary model, we investigate the welfare cost of a payment system that operates as a real-time gross settlement (RTGS) system. We illustrate how the cost of such systems does not ultimately derive from factors such as "payments gridlock" but instead from the credit...
Persistent link: https://www.econbiz.de/10010397487
Previous comparative analyses of gross and net settlement have focused on the credit risk of the central counterparty in net settlement arrangements and on the incentives for participants to alter the risk of the portfolio under net settlement. By modeling the trading economy that generates the...
Persistent link: https://www.econbiz.de/10010397535
An extensive literature in monetary theory has emphasized the role of money as a record-keeping device. Money assumes this role in situations where using credit would be too costly, and some might argue that this role will diminish as the cost of information, and thus the cost of credit-based...
Persistent link: https://www.econbiz.de/10010397617
The quintessential crime of the information age is identity theft, the malicious use of personal identifying data. In this paper we model "identity" and its use in credit transactions. Various types of identity theft occur in equilibrium, including "new account fraud," "existing account fraud,"...
Persistent link: https://www.econbiz.de/10010397651