A dynamic model of settlement

Cyril Monnet, Thorsten Koeppl and Ted Temzelides

No 604, Working Paper Series from European Central Bank

Abstract: We investigate the role of settlement in a dynamic model of a payment system where the ability of participants to perform certain welfare-improving transactions is subject to random and unobservable shocks. In the absence of settlement, the full information first-best allocation cannot be supported due to incentive constraints. In contrast, this allocation is supportable if settlement is introduced. This, however, requires that settlement takes place with a sufficiently high frequency. JEL Classification: E4, E5

Keywords: Intertemporal Incentives; payments; settlement (search for similar items in EconPapers)
Date: 2006-04
Note: 657474
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: A dynamic model of settlement (2008)
Working Paper: A Dynamic Model Of Settlement (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2006604

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