Policy Coordination in an International Payment System

James Chapman

Staff Working Papers from Bank of Canada

Abstract: Given the increasing interdependence of both financial systems and attendant payment and settlement systems a vital question is what form should optimal policy take when there are two connected payment systems with separate regulators. In this paper I show that two central banks operating in a non-cooperative way will not have an incentive to achieve the optimal allocation of goods. I further show that this non-cooperative outcome will be supported by a zero intraday interest rate and constant fixed exchange rate. This is in contrast to recent research; which has shown that domestically a zero intraday interest rate will achieve a social optimum and that the central bank has an incentive to achieve it.

Keywords: Payment clearing and settlement systems; Exchange rate regimes (search for similar items in EconPapers)
JEL-codes: E42 E58 F31 F33 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2008
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:08-17

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