The increased fragility of the banking industry has generated
growing concern about the risks associated with the payment
systems. Although in most industrial countries different
interbank payment systems coexist, little is really known
about their propierties in terms of risk and efficiency. We
tackle this question by comparing the two main types of
payment systems, gross and net, in a framework where
uncertainty arises from several sources: the time of
consumption, the location of consumption ...
The increased fragility of the banking industry has generated
growing concern about the risks associated with the payment
systems. Although in most industrial countries different
interbank payment systems coexist, little is really known
about their propierties in terms of risk and efficiency. We
tackle this question by comparing the two main types of
payment systems, gross and net, in a framework where
uncertainty arises from several sources: the time of
consumption, the location of consumption and the return on
investment. Payments across locations can be made either by
directly transferrring liquidity or by transferring claims
against the bank in the other location. The two mechanism are
interpreted as the gross and net settlement systems in
interbank payments. We characterize the equilibria in the two
systems and identify the trade-off in terms of safety and
efficiency.
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