The authors build a theoretical model that generates demand for collateral by Large Value Transfer System (LVTS) participants under the assumption that they minimize the cost of holding and managing collateral for LVTS purposes. The model predicts that the optimal amount of collateral held by each LVTS participant depends on the opportunity cost of collateral, the transactions costs of acquiring assets used as collateral and transferring them in and out of the LVTS, and the distribution of an LVTS participant's payment flows in the LVTS.
: Financial Institutions; Payment clearing and settlement systemsThis paper assesses analytically the ability of dynamic general-equilibrium sticky-price models to generate persistent real exchange rate fluctuations. It develops a tractable general-equilibrium model with Calvo-type price stickiness.
: Economic models; Exchange rates; International topics
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