Scale economies, cost efficiencies, and technological change in Federal Reserve payments

Paul Bauer (bauerpw@oneonta.edu) and Gary Ferrier

No 96-01, Financial Services working paper from Federal Reserve Bank of Cleveland

Abstract: This paper uses a stochastic cost frontier to examine the scale economies, cost efficiencies, and technological change of three payments instruments--check, automated clearinghouse (ACH) transfers, and Fedwire processing--provided by the Federal Reserve over the period 1990-94. We find evidence of substantial scale economies and cost inefficiencies in the ACH and Fedwire services. Check processing also exhibits substantial cost inefficiency, but constant returns to scale. Technological progress is found to be sizeable for ACH and Fedwire; check processing is found to have experienced technological \"regress,\" probably because of a decrease in processing volume over the sample period.

Keywords: Payment systems; Checks; Clearinghouses (Banking); Fedwire (search for similar items in EconPapers)
Date: 1996
New Economics Papers: this item is included in nep-eff, nep-ifn and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcfs:96-01

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