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

Charles M. Kahn

 

First Author :

Charles M. Kahn
Department of Finance
University of Illinois at Urbana-Champaign, College of Business
1206 S. Sixth Street, M/C 706
Champaign, IL 61820
USA

217-333-2813

c-kahn@illinois.edu

http://www.business.uiuc.edu/facultyprofile/faculty_profile.aspx?ID=222

 
 
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 collateralsaving innovation that further pressures central bank pre-eminence in payments settlement.
 
 
Manuscript Received : 2010
Manuscript Published : October, 2009
 
 
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