Money, payments systems, limited participation, and central banking

Hyung Sun Choi

The North American Journal of Economics and Finance, 2023, vol. 64, issue C

Abstract: A limited participation model is constructed to capture the role of a centralized payments system in conducting central bank’s policies. The government controls a money stock through the management of collateral requirements for the payments system as payment policy and open market operations as monetary policy. In equilibrium, due to limited participation, monetary policy whose effects are asymmetric across economic individuals may deteriorate some individual welfare. However, payment policy may wash out this distortion through an adjustment in the choice of credit-settlement types without deteriorating any individual welfare.

Keywords: Money; Payments systems; Limited participation; Central banking (search for similar items in EconPapers)
JEL-codes: E42 E44 E50 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:64:y:2023:i:c:s1062940822002091

DOI: 10.1016/j.najef.2022.101874

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