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Institutions of Foreign Exchange Settlement in a Two-Country Model

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  • Fujiki, Hiroshi

Abstract

Fujiki (2003) extends the Freeman (1996) model to show that when combined, an elastic money supply in the foreign exchange market and an elastic money supply in the domestic credit market yield efficiency gains in monetary equilibrium. This paper discusses whether three other institutional designs could achieve the same improvement in efficiency: (1) a private arrangement based on a payment versus a payment settlement standard supported by central banks' free intraday credit, (2) a financial institution that provides a negotiable certificate of deposit, and (3) a currency union.

Suggested Citation

  • Fujiki, Hiroshi, 2006. "Institutions of Foreign Exchange Settlement in a Two-Country Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(3), pages 697-719, April.
    • Handle: RePEc:mcb:jmoncb:v:38:y:2006:i:3:p:697-719
    DOI: 10.1353/mcb.2006.0043
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    Cited by:

    1. Schanz, Jochen, 2009. "How do different models of foreign exchange settlement influence the risks and benefits of global liquidity management?," Bank of England working papers 374, Bank of England.
    2. Hajime Tomura, 2019. "On Separation between Payment and Saving Instruments," Working Papers 1813, Waseda University, Faculty of Political Science and Economics.
    3. Tomura, Hajime, 2018. "Payment instruments and collateral in the interbank payment system," Journal of Economic Theory, Elsevier, vol. 178(C), pages 82-104.
    4. Hajime Tomura, 2021. "Nominal contracts and the payment system," The Japanese Economic Review, Springer, vol. 72(2), pages 185-216, April.
    5. Jonathan Chiu & Alexandra Lai, 2007. "Modelling Payments Systems: A Review of the Literature," Staff Working Papers 07-28, Bank of Canada.
    6. Kahn, Charles M. & Roberds, William, 2009. "Why pay? An introduction to payments economics," Journal of Financial Intermediation, Elsevier, vol. 18(1), pages 1-23, January.
    7. Fujiki, Hiroshi, 2014. "Institutional designs to alleviate liquidity shortages in a two-country model," Japan and the World Economy, Elsevier, vol. 31(C), pages 32-46.
    8. Hajime Tomura, 2019. "Imperfect Contract Enforcement and Nominal Liabilities," Working Papers 1905, Waseda University, Faculty of Political Science and Economics.

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