Why does overnight liquidity cost more than intraday liquidity?

Joydeep Bhattacharya, Joseph Haslag and Antoine Martin

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: In this paper, we argue that the observed difference in the cost of intraday and overnight liquidity is part of an optimal payments system design. In our environment, overnight liquidity affects output while intraday liquidity affects only the distribution of resources between money holders and non-money holders. The low cost of intraday liquidity is explained by the Friedman rule. The optimal cost differential achieves the twin objective of reducing the incentive to overuse money at night and encouraging payment-risk sharing during the day.

Date: 2009-06-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://dr.lib.iastate.edu/server/api/core/bitstre ... cdda1f136298/content
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
Journal Article: Why does overnight liquidity cost more than intraday liquidity? (2009)
Working Paper: Why does overnight liquidity cost more than intraday liquidity? (2007)
Working Paper: Why Does Overnight Liquidity Cost More Than Intraday Liquidity? (2007)
Working Paper: Why does overnight liquidity cost more than intraday liquidity? (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:200906010700001144

Access Statistics for this paper

More papers in ISU General Staff Papers from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().