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Speech
Summary of the Report on the Competitiveness of Puerto Rico's Economy
McAndrews, James J. (2012)
Remarks before the Puerto Rico Chamber of Commerce Annual Convention, Fajardo, Puerto Rico.
Speech , Paper 86

Report
The payment system benefits of high reserve balances
Kroeger, Alexander; McAndrews, James J. (2016-06-01)
The policy measures taken since the financial crisis have greatly expanded the size of the Federal Reserve?s balance sheet and have thus raised the level of aggregate bank reserves as well. Over the same period there has been a significant shift in the timing of payments made over the Federal Reserve?s Fedwire Funds Service toward earlier settlement. This paper documents this timing change and presents regression results suggesting that the increase in overall reserve balances explains the vast majority of this development. The paper also discusses the benefits of high aggregate reserve ...
Staff Reports , Paper 779

Journal Article
Antitrust issues in payment systems: bottlenecks, access, and essential facilities
McAndrews, James J. (1995-09)
Business Review , Issue Sep , Pages 3-12

Report
A study of competing designs for a liquidity-saving mechanism
McAndrews, James J.; Martin, Antoine (2008-07-01)
We study two designs for a liquidity-saving mechanism (LSM), a queuing arrangement used with an interbank settlement system. We consider an environment where banks are subjected to liquidity shocks. Banks must make the decision to send, queue, or delay their payments after observing a noisy signal of the shock. With a balance-reactive LSM, banks can set a balance threshold below which payments are not released from the queue. Banks can choose their threshold such that the release of a payment from the queue is conditional on the liquidity shock. With a receipt-reactive LSM, a payment is ...
Staff Reports , Paper 336

Report
A note on bank lending in times of large bank reserves
Skeie, David R.; McAndrews, James J.; Martin, Antoine (2011)
The amount of reserves held by the U.S. banking system reached $1.5 trillion in April 2011. Some economists argue that such a large quantity of bank reserves could lead to overly expansive bank lending as the economy recovers, regardless of the Federal Reserve?s interest rate policy. In contrast, we show that the size of bank reserves has no effect on bank lending in a frictionless model of the current banking system, in which interest is paid on reserves and there are no binding reserve requirements. We also examine the potential for balance-sheet cost frictions to distort banks? lending ...
Staff Reports , Paper 497

Report
Should there be intraday money markets?
McAndrews, James J.; Martin, Antoine (2008)
In this paper, we consider the case for an intraday market for reserves. We discuss the separate roles of intraday and overnight reserves and argue that an intraday market could be organized in the same way as the overnight market. We present arguments for and against a market for intraday reserves when the marginal cost of overnight reserves is positive. We also consider how reserves should be supplied when the cost of overnight reserves is zero. In that case, the distinction between overnight and intraday reserves becomes blurred, raising an important question: What is the role of the ...
Staff Reports , Paper 337

Speech
Modern recipes for financial crises
McAndrews, James J. (2015-12-04)
Remarks at the University of Iowa, December 4, 2015.
Speech , Paper 190

Discussion Paper
More Than Meets the Eye: Some Fiscal Implications of Monetary Policy
Remache, Julie; Del Negro, Marco; McAndrews, James J. (2013-08-15)
In 2012, the Fed’s remittances to the U.S. Treasury amounted to $88.4 billion. The vast majority of these remittances originated as income from the SOMA portfolio (see the second post in this series for an account of the history of SOMA income). While net income has been high in recent years because of the Fed’s large balance sheet, it is likely to drop in the future as the Fed normalizes interest rates. This is because the Fed will likely face increased interest expense on its reserve balances and possibly realize losses in the case of asset sales. A recent paper by economists at the ...
Liberty Street Economics , Paper 20130815

Working Paper
Two-sided Market, R&D and Payments System Evolution
Li, Bin Grace; McAndrews, James J.; Wang, Zhu (2019-02-08)
It takes many years for more efficient electronic payments to be widely used, and the fees that merchants (consumers) pay for using those services are increasing (decreasing) over time. We address these puzzles by studying payments system evolution with a dynamic model in a two-sided market setting. We calibrate the model to the U.S. payment card data, and conduct welfare and policy analysis. Our analysis shows that the market power of electronic payment networks plays important roles in explaining the slow adoption and asymmetric price changes, and the welfare impact of regulations may vary ...
Working Paper , Paper 19-3

Report
Settlement delays in the money market
McAndrews, James J.; Hilton, R. Spence; Bartolini, Leonardo (2008)
We track 38,000 money market trades from execution to delivery and return to provide a first empirical analysis of settlement delays in financial markets. In line with predictions from recent models showing that financial claims are settled strategically, we document a tendency by lenders to delay delivery of loaned funds until the afternoon hours. We find that banks follow a simple strategy to manage the risk of account overdrafts - delaying the settlement of large payments relative to that of small payments. More sophisticated strategies, such as increasing settlement delays when own liquid ...
Staff Reports , Paper 319

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