Real-time gross settlement and the costs of immediacy

Charles M. Kahn, William Roberds

Research output: Contribution to journalArticlepeer-review

Abstract

Using a neoclassical monetary model, we investigate the welfare cost of a payment system that operates as a real-time gross settlement (RTGS) system. We illustrate how the cost of such systems ultimately derives from the credit constraints imposed by RTGS. The effects of these constraints can be undone if the central bank makes intraday credit freely available. If intraday credit is only available on a collateralized basis, however, RTGS will always impose a liquidity cost.

Original languageEnglish (US)
Pages (from-to)299-319
Number of pages21
JournalJournal of Monetary Economics
Volume47
Issue number2
DOIs
StatePublished - Apr 2001

Keywords

  • E42
  • G21
  • Money
  • N20
  • Payments
  • Real-time gross settlement

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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