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Payment Systems, Multiple Types of Collateral, Banking, and Collateral Policy

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  • Hyung Sun Choi

    (Kyung Hee University)

Abstract

A monetary model is constructed to explore the real effects of multiple collateral requirements for credit settlements on the choice of cash and credit, banking activity, and consumption. Money serves not only as the means of payments but as the means of settlements. A collateral policy may be welfare-improving in a steady-state equilibrium when the nominal interest rate is positive. Reducing cash-collateral requirements increases the amount of cash as the means of payments and consumption with cash but adds up the cost of foregone interest. The optimal collateral policy is to balance out the marginal benefit and cost of holding cash.

Suggested Citation

  • Hyung Sun Choi, 2023. "Payment Systems, Multiple Types of Collateral, Banking, and Collateral Policy," Korean Economic Review, Korean Economic Association, vol. 39, pages 469-493.
    • Handle: RePEc:kea:keappr:ker-20230701-39-2-06
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Payment Systems; Collateral; Reserves; Banking; Collateral Policy;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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