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Journal Article
Thoughts on the Fed's role in the payment system
This essay concerns how the Federal Reserve?s role as a payment services provider can best be aligned with its broad mission to foster the integrity, efficiency, and accessibility of the U.S. payments system. A recommended strategy involves specialization in providing services where the central bank has a comparative advantage?notably, services directly related to providing a comprehensive, secure system of accounts for interbank settlement and potentially some additional services justified by economies of scope. If markets for other payment services evolve as expected, the recommended ...
Working Paper
Will the new $100 bill decrease counterfeiting?
A current U.S. policy is to introduce a new style of currency that is harder to counterfeit, but not immediately to withdraw from circulation all of the old-style currency. This policy is analyzed in a random-matching model of money, and its potential to decrease counterfeiting in the long run is shown. For various parameters of the model, three types of equilibria are found to occur. In only one does counterfeiting continue at its initial high level. In the other two, both genuine and counterfeit old-style money go out of circulation - immediately in one and gradually in the other. There are ...
Journal Article
Electronic bill presentment and payment--is it just a click away?
This article addresses the following questions about electronic presentment and payment (EBPP) in the business-to-consumer marketplace: Why aren't electronically presented bills always paid electronically? And, if EBPP does aid in the migration to fully electronic end-to-end payment, what are the barriers to its adoption.
Working Paper
Three contributions to the theory of decision under uncertainty
An intuitively natural consistency condition for contingent plans is necessary and sufficient for a contingent plan to be rationalized by maximization of conditional expected utility. One alternative theory of choice under uncertainty, the weighted-utility theory developed by Chew Soo Hong (1983) does not entail that contingent plans will generally satisfy this condition. Another alternative theory, the minimax theory as formulated by Savage (1972), does entail the consistency condition (at least for singleton-valued plans). ; Earlier title: Bayes contingent plans
Report
Contracts, constraints, and consumption
The paper compares implications of three kinds of models of households? consumption behavior: the basic permanent-income model, several models of liquidity-constrained households, and a model of an informationally-constrained efficient contract. These models are distinguished in terms of implications regarding the present discounted values of net trades to households at various levels of temporary income, and the households? marginal rates of substitution. Martingale consumption is studied as an approximation to the predicted consumption process of the efficient-contract model.
Journal Article
Money and debt in the structure of payments
In Scott Freeman?s (1996) model, payment system arrangements based on intermediated debt that is settled with money achieve higher welfare than does direct money payment. In a simplified version of Freeman?s model, welfare can be further improved and efficiency achieved by a monetary authority participating in a secondary market for debt or by a private intermediary using a common clearinghouse device. The analysis clarifies that ordinary private agents can assume the role of central bank or clearinghouse; no artificial agent, posited solely to play that role and endowed with special ...
Journal Article
Will the new $100 bill decrease counterfeiting?
A current U.S. policy is to introduce a new style of currency that is harder to counterfeit, but not immediately to withdraw from circulation all of the old-style currency. This policy is analyzed in a random matching model of money, and its potential to decrease counterfeiting in the long run is shown. For various parameters of the model, three types of equilibria are found to occur. In only one does counterfeiting continue at its initial high level. In the other two, both genuine and counterfeit old-style money go out of circulation?immediately in one and gradually in the other. There are ...
Report
Thoughts on the Fed's role in the payments system
2000 Annual Report Essay
Journal Article
Can a \\"credit crunch\\" be efficient?
Two observations have sometimes been viewed as evidence that the equilibrium allocations of intermediated credit markets are inefficient. First, low-income households' marginal propensity to consume is close to unity. Second, even high-income households seem to face nonprice constraints during recessions. This paper presents a model that possesses both of these features. (A recession is modeled as an economy in which the equilibrium level of investment is at its lowest possible level.) However, contrary to the conventional view, the equilibrium of this model is ex ante efficient. The model ...