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Conference Paper
Demandable debt as a means of payment: banknotes versus checks
Journal Article
The design of wholesale payments networks: the importance of incentives
Most people are familiar with retail payments systems such as checks and credit cards. Less familiar are wholesale payments systems, which consist of electronic networks used for sending large sums among banks. A feature common to all wholesale networks is that settlement is carried out by exchange of funds held in banks' reserve accounts at a central bank, though the rules for settlement vary. This article considers the question of what is the best design for a wholesale payments system, in particular whether it should settle on a net or a real-time gross basis, and some of the difficult ...
Working Paper
Payment system settlement and bank incentives
In this paper we consider the relative merits of net versus gross settlement of interbank payments. Net settlement economizes on the costs of holding non-interest-bearing reserves but increases moral hazard problems. The "put option" value of default under net settlement can also distort banks' investment incentives. ; Absent these distortions, net settlement dominates gross, although the optimal net settlement scheme may involve a positive probability of default. Net settlement becomes more attractive relative to gross settlement if bank assets have to be liquidated at less than book value.
Conference Paper
Payment system settlement and bank incentives
Working Paper
A theory of transactions privacy
In this paper, we consider the costs and benefits of transactions privacy. In the environment we consider, privacy is the concealment of potentially useful information, but concealment also potentially bestows benefits. In some versions of the environment, the standard Coasian logic applies: given an unambiguous initial assignment of rights and sufficient flexibility in contracting, efficiency in information revelation will result. Coasian bargaining may be impeded, however, by either an inability to make certain commitments or by the presence of significant investments that must be made ...
Conference Paper
On the role of bank coalitions in the provision of liquidity
Conference Paper
Bank consolidation and consumer loan interest rates
Journal Article
The Fed and Its Shadow: A Historical View
Central bank policies have always incorporated both a discretionary or active component and a passive component. Successful central banking has required a coordination of the two components. After a period of apparent dormancy, the passive component of monetary policy has emerged from the shadows and become relevant for Federal Reserve policy today.