The Welfare Effects of a Liquidity-Saving Mechanism
This paper considers the welfare effect of introducing a liquidity-saving mechanism (LSM) in a real-time gross settlement (RTGS) payment system. We study the planner's problem to get a better understanding of the economic role of an LSM and find that an LSM can achieve the planner's allocation for some parameter values. The planner's allocation cannot happen without an LSM, as long as some payments can be delayed without cost. We show that, in equilibrium with an LSM, there can be either too few or too many payments settled early compared with the planner's allocation, depending on the parameter values. Using Fedwire data to calibrate our model, we describe the equilibrium that would arise with an LSM and compare welfare with and without an LSM. Our results suggest that introducing an LSM could have significant benefits.
An Analysis of Competitive Externalities in Gross Settlement Systems
Following the ongoing debate on risks in interbank payment networks, gross settlement systems are being adopted in several industrialized countries. These systems, which effect real-time transfers of monetary base among bank accounts, add management of intraday liquidity to the duties traditionally performed by central banks, and require new, ad hoc policy instruments. The paper presents a simple model of a real-time gross settlement (RTGS) system, which is used to analyze the reaction of banks and monetary policy variables to this new environment. It is shown that if daylight liquidity is costly, a network externality may induce banks to postpone payment activity, thereby affecting the quality of the information available to counterparts for cash management purposes. The increased noise may in turn induce higher than optimal levels of banks' end-of-day reserve holdings, relative to a social optimum, with adverse effects on expected prots. The rise of a daylight market for funds, predicted by the model, does not solve the mentioned externality problem. Some corrective policy measures are discussed.
Numerical tools applied to power reactor noise analysis
In order to be able to calculate the space- and frequency-dependent neutron noise in real inhomogeneous systems in two-group theory, a code was developed for the calculation of the Green's function (dynamic transfer function) of such systems. This paper reports on the development as well as the test and application of the numerical tools employed. The code that was developed yields the space-dependence of the fluctuations of the neutron flux induced by fluctuating properties of the medium in the two-group diffusion approximation and in a two-dimensional representation of heterogeneous systems, for both critical systems and non-critical systems with an external source. Some applications of these tools to power reactor noise analysis are then described, including the unfolding of the parameters of the noise source from the induced neutron noise, measured at a few discrete locations throughout the core. Other concrete applications concern the study of the space-dependence of the Decay Ratio in Boiling Water Reactors, the noise-based estimation of the Moderator Temperature Coefficient of reactivity in Pressurized Water Reactors, the modeling of the beam- and shell-mode core-barrel vibrations in Pressurized Water Reactors, and the investigation of the validity of the point-kinetic approximation in subcritical systems driven by an external source. In most of these applications, calculations performed using the code are compared with at-power plant measurements. Power reactor noise analysis applications of the above type, i.e. core monitoring without disturbing plant operation, is of particular interest in the framework of the extensive program of power uprates worldwide.