Effects of Federal Reserve services on the efficiency of the system for collecting checks in the United States: 1915--30

This paper investigates whether the services of the Federal Reserve System improved the efficiency of the system in the United States for collecting checks relative to the efficiency of the system used by banks just prior to the formation of the Federal Reserve. There are two types of evidence that the Fed's services improved efficiency. First, the Reserve Banks quickly became major processors of interregional checks, even though banks could have continued to use the prior payments arrangements. Second, declines in the ratios of cash to total assets of banks can be attributed to the development of the Fed's check collection services.