Monetary Policy Implementation and Payment System Modernization

Jonathan Witmer
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Jonathan Witmer: Bank of Canada

International Journal of Central Banking, 2023, vol. 19, issue 3, 325-357

Abstract: 24/7 payment settlement may affect the demand for central bank reserves and thus could have an effect on monetary policy implementation. By modifying the standard workhorse model of monetary policy implementation (Poole 1968), we show that 24/7 payment settlement induces a precautionary demand for central bank reserves. Absent any changes or response by the central bank, this will put upward pressure on the overnight interest rate in frameworks with a low level of reserves.

JEL-codes: E E4 E40 E42 E43 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2023:q:3:a:8

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