Analyzing Alternative Intraday Credit Policies in Real-Time Gross Settlement Systems

Posted: 9 Jun 1998

See all articles by Craig Furfine

Craig Furfine

Kellogg School of Management - Department of Finance

Jeff Stehm

Government of the United States of America - Division of Reserve Bank Operations and Payment Systems

Abstract

This paper examines a central bank's choice of intraday credit policy for Real-Time Gross Settlement (RTGS) systems. Formal analysis of central bank objectives and commercial bank payment activity provides insight into both the choice and effects of several possible intraday credit policies. Observed intraday credit policies are interpreted within the context of the model. Among G-10 central banks, different combinations of prices, collateral, and quantity limits have been chosen to manage the supply of intraday credit. Conditions that rationalize these choices are shown to rely on a) central bank preferences regarding credit risk and systemic risk, b) liquidity management technologies, and c) the cost of collateral.

JEL Classification: E58

Suggested Citation

Furfine, Craig and Stehm, Jeff, Analyzing Alternative Intraday Credit Policies in Real-Time Gross Settlement Systems. Available at SSRN: https://ssrn.com/abstract=96108

Craig Furfine

Kellogg School of Management - Department of Finance ( email )

Evanston, IL 60208
United States

Jeff Stehm (Contact Author)

Government of the United States of America - Division of Reserve Bank Operations and Payment Systems ( email )

20th and Constitution Ave NW
Washington, DC 20551
United States

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