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Private Payment Systems, Collateral, and Interest Rates

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Title: Private Payment Systems, Collateral, and Interest Rates
Author(s): Kahn, Charles M.
Subject(s): payment systems collateral monetary policy inside money
Abstract: Recent developments in private payments arrangements, particularly at the wholesale level, (including recent innovations in China) challenge central banks’ longstanding monopoly on the provision of the ultimate means of settlement for financial transactions. This paper examines competition between public payments arrangements and private intermediaries, and the effect on central banks’ role in monetary policy. Central to the issue is the role of collateral both as a requirement for participation in central bank sponsored payments arrangements and as the backing for private intermediary arrangements. The presence of private systems serves as a check on the ability of a monetary authority to tighten monetary policy.
Issue Date: 2011-10-22
Publisher: Springer-Verlag
Citation Info: Annals of Finance forthcoming
Genre: Article
Type: Text
Language: English
Publication Status: published or submitted for publication
Peer Reviewed: is peer reviewed
Rights Information: Copyright Springer-Verlag
Date Available in IDEALS: 2011-11-07

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