Quantifying the benefits of a liquidity-saving mechanism
Abstract: 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 implementing an LSM, on the order of hundreds of thousands of dollars per day.
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Provider: Federal Reserve Bank of New York
Part of Series: Staff Reports
Publication Date: 2010