Intraday two-part tariff in payment systems

Tomohiro Ota ()

No 428, Bank of England working papers from Bank of England

Abstract: This paper studies the optimal intraday pricing in payment systems and its impact on banks’ payment behaviour and intraday liquidity management. A model is developed to compare the performance of two different mechanisms to reduce payment delay: a throughput guideline and a tariff that varies over time, and concludes that a linear time-varying tariff achieves a better outcome unless the payment system experiences a system-wide liquidity shock. We show that settlement delay can be socially efficient, contrary to general understanding of the literature, when it reduces the aggregate cost of liquidity. The theoretical model suggests that the tariff eliminates the inefficient settlement delay that does not contribute to lowering the cost, while leaving the socially efficient delay.

Keywords: Payment; RTGS; two-part tariff; throughput guideline (search for similar items in EconPapers)
JEL-codes: E42 E58 G21 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2011-05-31
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0428

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