While net settlement systems make more efficient use of liquidity than gross settlement systems, they are known to generate systemic risk. What does that tendency imply for the stability of the payments (or financial) system when the two settlement systems coexist? Do liquidity shortages induce...

This paper offers a monetary theory of asset liquidity—one that emphasizes the role of assets in payment arrangements—and it explores the implications of the theory for the relationship between assets’ intrinsic characteristics and liquidity, and the effects of monetary policy on asset...

An exploration of the issues that must be addressed if stored-value cards and other electronic money systems are to be major payment mechanisms in the global financial market.

Once the Federal Reserve Banks started providing par interbank funds transfers, their check collection service was unnecessary to bring nationwide par check collection in competitive banking markets. The survival of non-par banks probably reflected the absence of competition in the markets where...

Although the cashless society that has been predicted for at least 20 years has not yet materialized, the new forms of card- and software-based electronic money may be a partial alternative to current forms of payments. This paper examines some of the factors that will influence the adoption of...

Caught between the end of the National Banking Era and the beginning of the Federal Reserve System, the crisis of 1914 provides an example of a banking panic avoided. We investigate how this outcome was achieved by examining data on the issues of Aldrich-Vreeland emergency currency and clearing...

What implications do 21st century monetary innovations bring for holdings of central bank money and standards of value? Emerging technologies such as cybercash, e-cash, and smart cards can be expected to reduce demand for central bank money, but the theoretical framework for monetary policy has...

This paper uses a stochastic cost frontier to examine the scale economies, cost efficiencies, and technological change of three payments instruments--check, automated clearinghouse (ACH) transfers, and Fedwire processing--provided by the Federal Reserve over the period 1990-94. We find evidence...

The reserve banks’ check collection service was designed in 1913 to serve as "glue," attaching the new central bank to the commercial and financial markets through member banks. Successful creation and operation of the Federal Reserve System was thought to be more likely if the reserve banks...

An examination of three policy problems associated with daylight credit and an evaluation of three reform proposals to alleviate the payment system risk associated with Federal Reserve Banks' extension of daylight credit to financial institutions.