A duality theory of payment systems
Rodrigo Andrés Peñaloza ()
Journal of Mathematical Economics, 2009, vol. 45, issue 9-10, 679-692
We model the Central Bank's management of intraday liquidity in modern real-time gross settlement systems as a linear programming problem parameterized by different intraday monetary policies, such as reserve requirements, net debit caps and Lombard loans. We then use duality theory to determine the shadow-prices of constraints of each bank. These shadow-prices can be used by the Central Bank to set personalized intraday monetary policies in order to reduce idleness of money and to give a microfoundation of the too-big-to-fail policy.
Keywords: Central; banking; Real-time; gross; settlement; systems; Shadow-prices (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:45:y:2009:i:9-10:p:679-692
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