The intraday liquidity management game

Article Abstract:

A game theoretical framework is used to analyze the intraday behavior of banks with respect to settlement of interbank claims in a real-time gross settlement setting depending on the intraday credit policy of the central bank encompassing two well-known game theoretical paradigms: the prisoner's dilemma and the stag hunt. The former arises in a collateralized credit regime where the postponement of payments is socially inefficient while the latter arises in a priced credit regime where the postponement of payments can be socially efficient.

Prisoner's dilemma game

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The payments system, liquidity, and rediscounting

Article Abstract:

A model of the payments system is presented. In the model, debts are paid with fiat money, some purchases are made with debt and an active market in second-hand debt exists. The model can serve as a guide to optimal central-bank rediscounting. It suggests that the optimal central-bank policy should include the flexible provision of a stock of fiat money so that liquidity-constrained equilibria can be removed.

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Income redistributions without catastrophes

Article Abstract:

It has been accepted that simple lump-sum taxes and transfers may come across multiplicity, instability of equilibria and counter-intuitive utility changes. A finite sezuence of lump-sum taxes and transfers keeping clear of these problems are developed by gathering information about the equilibrium manifold. The equilibrium at every level of the sequence changes with changes in taxes and transfers.

Research, Analysis, Taxation, Income distribution, Welfare economics, Singularities (Mathematics)

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