A Model of Tiered Settlement Networks

James Chapman, Jonathan Chiu and Miguel Molico

Staff Working Papers from Bank of Canada

Abstract: This paper develops a model of settlement system to study the endogenous structure of settlement networks, and the welfare consequences of clearing agent failure. The equilibrium degree of tiering is endogenously determined by the cost structure and the information structure. The degree of tiering is decreasing in the fixed cost of operating the second-tier network and the availability of public credit history. Furthermore, the welfare effects of clearing agent failure can be decomposed into operational inefficiency and the loss of private information.

Keywords: Payment; clearing; and; settlement; systems (search for similar items in EconPapers)
JEL-codes: E42 E58 G21 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2008
New Economics Papers: this item is included in nep-com, nep-mac and nep-net
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Citations: View citations in EconPapers (8)

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Journal Article: A Model of Tiered Settlement Networks (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:08-12

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