Liquidity-saving mechanisms

Arbeitspapier

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 liquiditysaving mechanism increases or decreases welfare.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 282

Classification and Topics

• Classification: Wirtschaft ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems ; Central Banks and Their Policies ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: liquidity-saving mechanism, real-time gross settlement, large-value payment systems ; Zahlungsverkehr ; Verrechnungsverkehr ; Bankenliquidität ; Geldmarkt ; Liquiditätseffekt ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Martin, Antoine ; McAndrews, James
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/60524
• Last update: 10.03.2025, 11:43 AM CET