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An economic analysis of liquidity-saving mechanisms

Martin, Antoine; McAndrews, James - In: Economic Policy Review (2008) Sep, pp. 25-39

-saving mechanisms (LSMs), tools used in conjunction with real-time gross settlement (RTGS) systems. LSMs give system participants, such … as banks, an option not offered by RTGS alone: they can queue their outgoing payments. Queued payments are released if … as well as quicken settlement. This article analyzes the performance of RTGS systems with and without the addition of an …

Persistent link: https://www.econbiz.de/10005372902

An economic perspective on the enforcement of credit arrangements: the case of daylight overdrafts in Fedwire

Martin, Antoine; Mills, David C. - In: Economic Policy Review (2008) Sep, pp. 161-168

A fundamental concern for any lender is credit risk - the risk that a borrower will fail to fully repay a loan as expected. Thus, lenders want credit arrangements that are designed to compensate them for - and help them effectively manage - this type of risk. In certain situations, central banks...

Persistent link: https://www.econbiz.de/10005372923

Recent evolution of large-value payment systems : balancing liquidity and risk

Martin, Antoine - In: Economic Review (2005) Q I, pp. 33-57

Large-value payment systems have evolved rapidly in the last 20 years, continually striking a balance between providing liquidity and keeping settlement risk under control. Changes to the design or to the risk management policies of such systems were needed, in part, due to the growth in the...

Persistent link: https://www.econbiz.de/10005379699

Liquidity-saving mechanisms in collateral-based RTGS payment systems

Jurgilas, Marius; Martin, Antoine - Federal Reserve Bank of New York - 2010

This paper proposes a simple mechanism of capital taxation that is negatively correlated with labor supply. Using a life-cycle model of heterogeneous agents, I show that this tax scheme provides a strong work incentive when households possess large assets and high productivity later in the life...

Persistent link: https://www.econbiz.de/10008489314

Quantifying the benefits of a liquidity-saving mechanism

Atalay, Enghin; Martin, Antoine; McAndrews, James - Federal Reserve Bank of New York - 2010

This paper attempts to quantify the benefits associated with operating a liquidity-saving mechanism (LSM) in Fedwire, the large-value payment system of the Federal Reserve. Calibrating the model of Martin and McAndrews (2008), we find that potential gains are large compared to the likely cost of...

Persistent link: https://www.econbiz.de/10008498297

Payment networks in a search model of money

Martin, Antoine; Orlando, Michael; Skeie, David - Federal Reserve Bank of New York - 2006

In a simple search model of money, we study a special kind of memory that gives rise to an arrangement resembling a payment network. Specifically, we assume that agents can pay a cost to access a central database that tracks payments made and received. Incentives must be provided to agents to...

Persistent link: https://www.econbiz.de/10005526318

Barriers to network-specific innovation

Martin, Antoine; Orlando, Michael J. - Federal Reserve Bank of Kansas City - 2004

We consider an environment in which participants make payments over a network and can invest in a technology that reduces the marginal cost of using the network. A network effect results in multiple equilibria; either all agents invest and usage of the network is high or no agents invest and...

Persistent link: https://www.econbiz.de/10005410709

Barriers to network-specific innovation

Martin, Antoine; Orlando, Michael J. - Federal Reserve Bank of New York - 2005

We examine incentives for network-specific investment and the implications for network governance. We model an environment in which participants that make payments over a network can invest in a technology that reduces the marginal cost of using the network. A network effect results in multiple...

Persistent link: https://www.econbiz.de/10005420505

The welfare effects of a liquidity-saving mechanism

Atalay, Enghin; Martin, Antoine; McAndrews, James - Federal Reserve Bank of New York - 2008

settlement (RTGS) payment system. We study the planner's problem to get a better understanding of the economic role of an LSM and …

Persistent link: https://www.econbiz.de/10005420569

Why does overnight liquidity cost more than intraday liquidity?

Bhattacharya, Joydeep; Haslag, Joseph H.; Martin, Antoine - Federal Reserve Bank of New York - 2007

In this paper, we argue that the observed difference in the cost of intraday and overnight liquidity is part of an optimal payments system design. In our environment, the interest charged on overnight liquidity affects output, while the cost of intraday liquidity only affects the distribution of...

Persistent link: https://www.econbiz.de/10005420616