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Settlement Liquidity and Monetary Policy Implementation—Lessons from the Financial Crisis
"... system performed dependably during the financial crisis, processing record volumes and values of trades executed in stressed financial markets. • Emergency policy measures employed by the Federal Reserve to provide liquidity and stability to the financial system during and after the crisis had impor ..."
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system performed dependably during the financial crisis, processing record volumes and values of trades executed in stressed financial markets. • Emergency policy measures employed by the Federal Reserve to provide liquidity and stability to the financial system during and after the crisis had important effects on settlement liquidity and thus on the efficiency of clearing and settlement system activity. • The measures led to a substantial decrease in daylight overdrafts extended by the Federal Reserve and an improvement in payment settlement timing. • The reduction in overdrafts lowered the Federal Reserve’s credit risk while the earlier settlement time suggested significant efficiency gains and diminished operational risks. T 1.
Global Trends in Large-Value Payments
- Federal Reserve Bank of New York Economic Policy Review
, 2008
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The role of time-critical liquidity in financial markets,” Economic Perspectives, Federal Reserve
- Bank of Chicago,
, 2013
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THE CONQUEST OF WORLDWIDE INFLATION: CURRENCY COMPETITION AND ITS IMPLICATIONS FOR INTEREST RATES AND THE YIELD CURVE
"... In the United States and in virtually every country around the world, inflation has declined, and in most countries dramatically so. In addition, the volatility of inflation and expectations of future inflation have also fallen significantly. I will call these changes experienced around the globe th ..."
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In the United States and in virtually every country around the world, inflation has declined, and in most countries dramatically so. In addition, the volatility of inflation and expectations of future inflation have also fallen significantly. I will call these changes experienced around the globe the conquest of worldwide inflation. I will begin by providing a few facts about the substantial improvement of inflation during roughly the past decade compared with the quarter century that preceded it. I will then try to understand why this remarkable decline in inflation has taken place. In particular, I argue that globalization, deregulation, and financial innovation, in part spurred by experiences of high inflation in the 1980s, have fostered currency competition that has led to improved central bank performance and, hence, the recent conquest of worldwide inflation. Friedrich Hayek (1976) had long ago advocated permitting greater competition among currencies, arguing that there would be a race to the top rather than a race to the bottom. Regardless of what one might think of Hayek’s policy proposals, technological change in a globalized and competitive marketplace, I believe, has increased competition among currencies issued by central banks. The increased competition among currencies has changed the ability and the incentives of governments and central banks to pursue high-inflation policies. As I will argue, such changes have allowed improvements in central bank independence, governance, and credibility, thereby leading to better inflation outcomes. In addition,
A Service of zbw Leibniz-Informationszentrum Wirtschaft Leibniz Information Centre for Economics The role of public policy in the process of regional convergence
"... Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, ..."
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Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.
Journal of Financial Market Infrastructures Volume 1/Number 1, Fall 2012 (3–27) Auto-collateralization as a liquidity-saving mechanism
"... This paper examines the effects of introducing an auto-collateralization scheme in a simulated securities settlement system. Using artificially generated data, it shows that auto-collateralization can substantially lower liquidity needs without delaying settlement. By allowing for a more efficient u ..."
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This paper examines the effects of introducing an auto-collateralization scheme in a simulated securities settlement system. Using artificially generated data, it shows that auto-collateralization can substantially lower liquidity needs without delaying settlement. By allowing for a more efficient usage of collateral, it also reduces intraday credit exposures. The paper further demonstrates how these efficiency improvements in usage of liquidity depend on the structure of the settlement cycle. The benefits of auto-collateralization are particularly large when system participants ’ incoming and outgoing payments are negatively correlated over time. Finally, the impact of participant defaults is assessed, and it is shown that auto-collateralization protects against liquidity risk in certain stress scenarios. 1
Reserve System. Any errors or omissions are the responsibility of the authors
, 2008
"... This paper presents preliminary findings and is being distributed to economists and other interested readers solely to stimulate discussion and elicit comments. The views expressed in the paper are those of the authors and are not necessarily reflective of views at the Federal Reserve Bank of New Yo ..."
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This paper presents preliminary findings and is being distributed to economists and other interested readers solely to stimulate discussion and elicit comments. The views expressed in the paper are those of the authors and are not necessarily reflective of views at the Federal Reserve Bank of New York or the Federal
FEDERAL RESERVE BANK of ATLANTA WORKING PAPER SERIES The Bank of Amsterdam through the Lens of Monetary Competition
, 2012
"... Abstract: In 1683 the Bank of Amsterdam introduced a form of fiat money that successfully competed with the coinage of the time. We argue that the principal motive for this monetary innovation was the uncertain value of coins circulating within the Dutch Republic. The Bank’s fiat money regime persis ..."
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Abstract: In 1683 the Bank of Amsterdam introduced a form of fiat money that successfully competed with the coinage of the time. We argue that the principal motive for this monetary innovation was the uncertain value of coins circulating within the Dutch Republic. The Bank’s fiat money regime persisted until the downfall of the Dutch Republic in 1795 and incorporated modern features such as gross settlement of financial obligations, open market operations, central bank repurchase agreements (the equivalent thereof), and emergency liquidity facilities. JEL classification: E42, E58, N14 Key words: fiat money, central bank, monetary competition This paper was prepared for the conference “The Political Economy of Monetary Innovation, ” held in Heidelberg, Germany, August 9–12, 2012. The authors are grateful to the conference organizers, Peter Bernholz and Roland Vaubel, as well as to conference participants for comments on an earlier draft. The views expressed here are the authors ’ and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors’ responsibility.
Federal Reserve Bank of New York Staff Reports Repo Runs
, 2010
"... This paper presents preliminary findings and is being distributed to economists and other interested readers solely to stimulate discussion and elicit comments. The views expressed in this paper are those of the authors and are not necessarily reflective of views at the Federal Reserve Bank of New Y ..."
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This paper presents preliminary findings and is being distributed to economists and other interested readers solely to stimulate discussion and elicit comments. The views expressed in this paper are those of the authors and are not necessarily reflective of views at the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors. Repo Runs
LIQUIDITY REQUIREMENTS AND PAYMENT DELAYS PARTICIPANT TYPE DEPENDENT PREFERENCES
, 1291
"... In 2011 all ECB publications feature a motif taken from the €100 banknote. NOTE: This Working Paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the author and do not necessarily reflect those of the ECB. ..."
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In 2011 all ECB publications feature a motif taken from the €100 banknote. NOTE: This Working Paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the author and do not necessarily reflect those of the ECB.
