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Reaction Functions of the Participants in Colombia’s Large-value Payment System

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  • Constanza Martínez
  • Freddy Cepeda

Abstract

Large value payment flows can be disrupted by several types of failures such as operational incidents, problems experienced by the administrator of the payments settlement system, outages in the communications networks and the inability of a participant to submit payments due to insufficient liquidity. During any of these incidents, the participants of the system can either decide to stop, delay or continue sending payment orders, which fundamentally depends on the elements that originated the disruption, as well as on the alternative liquidity sources available to each entity. By means of Tobit models with random effects we evaluated the payments activity of Colombian financial institutions. Our results suggest that participants’ reaction vary in accordance with the type of incident, along with the type of entity and its role in the market.

Suggested Citation

  • Constanza Martínez & Freddy Cepeda, 2015. "Reaction Functions of the Participants in Colombia’s Large-value Payment System," Borradores de Economia 12651, Banco de la Republica.
    • Handle: RePEc:col:000094:012651
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    References listed on IDEAS

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    Cited by:

    1. Carlos León & Constanza Martínez-Ventura & Freddy Cepeda-López, 2019. "Short-Term Liquidity Contagion in the Interbank Market," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 38(76), pages 51-80, January.
    2. Constanza Martínez & Freddy Cepeda, 2016. "Free-riding on Liquidity in the Colombian LVPS," Borradores de Economia 977, Banco de la Republica de Colombia.

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    More about this item

    Keywords

    Payment system; operational incidents; payment reaction function.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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