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Collateral Policy in a World of Round-the-Clock Payment

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  • Kahn, Charles M.

    (University of Illinois, Urbana-Champaign)

Abstract

This paper examines competition between private and public payments settlement systems, and examines the consequences of round-the-clock private payments arrangements on the competitiveness of public systems. Central to the issue is the role of collateral both as a requirement for participation in central bank sponsored payments arrangements and as the backing for private intermediary arrangements. The presence of private systems serves as a check on the ability of a monetary authority to tighten monetary policy. Round-the-clock systems are an example of a collateral saving innovation that further pressures central bank pre-eminence in payments settlement.

Suggested Citation

  • Kahn, Charles M., 2009. "Collateral Policy in a World of Round-the-Clock Payment," Working Papers 10-0100, University of Illinois at Urbana-Champaign, College of Business.
    • Handle: RePEc:ecl:illbus:10-0100
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    File URL: http://www.business.illinois.edu/Working_Papers/papers/10-0100.pdf
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    References listed on IDEAS

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    1. 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.
    2. Berentsen, Aleksander & Monnet, Cyril, 2008. "Monetary policy in a channel system," Journal of Monetary Economics, Elsevier, vol. 55(6), pages 1067-1080, September.
    3. Michael Woodford, 2000. "Monetary Policy in a World Without Money," International Finance, Wiley Blackwell, vol. 3(2), pages 229-260, July.
    4. Berentsen, Aleksander & Camera, Gabriele & Waller, Christopher, 2007. "Money, credit and banking," Journal of Economic Theory, Elsevier, vol. 135(1), pages 171-195, July.
    5. Charles A. E. Goodhart, 2000. "Can Central Banking Survive the IT Revolution?," International Finance, Wiley Blackwell, vol. 3(2), pages 189-209, July.
    6. Sargent, Thomas J & Wallace, Neil, 1982. "The Real-Bills Doctrine versus the Quantity Theory: A Reconsideration," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1212-1236, December.
    7. Hongyi Chen & Wensheng Peng & Chang Shu, 2009. "Renminbi as an International Currency: Potential and Policy Considerations," Working Papers 182009, Hong Kong Institute for Monetary Research.
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    Cited by:

    1. Williamson, Stephen & Wright, Randall, 2010. "New Monetarist Economics: Models," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 2, pages 25-96, Elsevier.
    2. Tomura, Hajime, 2018. "Payment instruments and collateral in the interbank payment system," Journal of Economic Theory, Elsevier, vol. 178(C), pages 82-104.
    3. Charles Kahn, 2013. "Private payment systems, collateral, and interest rates," Annals of Finance, Springer, vol. 9(1), pages 83-114, February.

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