This paper considers the welfare effects of introducing a liquidity-saving mechanism (LSM) in a real-time gross settlement (RTGS) payment system. We study the planner’s problem to get a better understanding of the economic role of an LSM and find that an LSM can achieve the planner’s...

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...

I quantify the contribution of sectoral shocks to business cycle fluctuations in aggregate output. I develop a multi-industry general equilibrium model in which each industry employs the material and capital goods produced by other sectors, and then estimate this model using data on U.S....

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...