Production, hidden action, and the payment systemGu, C., Guzman, M. and Haslag, J. (2011) Production, hidden action, and the payment system. Journal of Monetary Economics, 58 (2). pp. 172-182. ISSN 0304-3932 Full text not archived in this repository. It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing. To link to this item DOI: 10.1016/j.jmoneco.2011.03.004 Abstract/SummaryIn this paper, we study a model economy that examines the optimal intraday rate. In Freeman’s (1996) paper, he shows that the efficient allocation can be implemented by adopting a policy in which the intraday rate is zero. We modify the production set and show that such a model economy can account for the non-uniform distribution of settlements within a day. In addition, by modifying both the consumption set and the production set, we show that the central bank may be able to implement the planner’s allocation with a positive intraday interest rate.
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