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Working Paper
Real-time gross settlement and the costs of immediacy
Using a neoclassical monetary model, we investigate the welfare cost of a payment system that operates as a real-time gross settlement (RTGS) system. We illustrate how the cost of such systems does not ultimately derive from factors such as "payments gridlock" but instead from the credit constraints imposed by RTGS. We also investigate the welfare consequences of various approaches to the allocation of daylight credit by central banks. The two most popular approaches, collateralization and charging an administered intraday interest rate, are shown to be effective along some dimensions but ...
Report
Monetary targeting in a dynamic macro model
The consequences of a straightforward monetary targeting scheme are examined for a simple dynamic macro model. The notion of ?targeting? used is the strategic one introduced by Rogoff (1985). Numerical calculations are used to demonstrate that for the model under consideration, monetary targeting is likely to lead to a deterioration of policy performance. These examples cast doubt upon the general efficacy of simple targeting schemes in dynamic rational expectations models.
Conference Paper
On the role of bank coalitions in the provision of liquidity
Working Paper
Optimal pricing of payment services when cash is an alternative
Payments are increasingly being made with payment cards rather than currency-this despite the fact that the operational cost of clearing a card payment usually exceeds the cost of transferring cash. In this paper, the authors examine this puzzle through the lens of monetary theory. They consider the design of an optimal card-based payment system when cash is available as an alternative means of payment, and derive conditions under which cards will be preferred to cash. The authors find that a feature akin to the controversial "no-surcharge rule" may be necessary to ensure the viability of ...
Report
Solution of linear-quadratic- Gaussian dynamic games using variational methods
Methods are presented for solving a certain class of rational expectations models, principally those that arise from dynamic games. The methods allow for numerical solution using spectral factorization algorithms and for estimation of these models using maximum likelihood techniques.
Report
Payment intermediation and the origins of banking
The medieval banks of continental Europe facilitated trade by serving as payment intermediaries. Depositors commonly would pay one another by transferring bank balances with the aid of overdraft credit. We model this process in an environment of intermediate good exchange with incomplete contract enforcement. Our model suggests that the early banks were capable of accessing the ?netting credit? that exists by virtue of there being a high proportion of offsetting transactions in an economy. Individual traders are unable to net their individual positions because of difficulty in enforcing ...
Working Paper
Towards the systematic measurement of systemic risk
Journal Article
Forecasting and modeling the U.S. economy in 1986-88