Quantifying the Benefits of a Liquidity-Saving Mechanism - Federal Reserve Bank of New York

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Quantifying the Benefits of a Liquidity-Saving Mechanism

2014 May 2010 Number 447

JEL classification: E42, E58, G21

Authors: Enghin Atalay, Antoine Martin, and James McAndrews

This paper attempts to quantify the benefits associated with operating a liquidity-saving mechanism (LSM) in Fedwire, the large-value payment system of the Federal Reserve. Calibrating the model of Martin and McAndrews (2008), we find that potential gains are large compared to the likely cost of implementing an LSM, on the order of hundreds of thousands of dollars per day.

Available only in PDF 26 pages / 258 kb

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