Free-riding on Liquidity in the Colombian LVPS
La serie Borradores de Economía es una publicación de la Subgerencia de Estudios Económicos del Banco de la República. Los trabajos son de carácter provisional, las opiniones y posibles errores son responsabilidad exclusiva del autor y sus contenidos no comprometen al Banco de la República ni a su Junta Directiva.
The functioning of large-value payment systems (LVPSs) can be affected when some of its participants voluntarily decide to delay their payments until they can totally fund them with the payments received from other participants. This behaviour, known as the free-rider problem, can cause an under-provision of liquidity in LVPSs that operate under a RTGS (real-time gross settlement) mode. With the aim of determining whether there are free-riders in the Colombian LVPS (CUD), we empirically tested this payment strategy: firstly, using regression techniques (quantile regression models) and secondly, computing the empirical quantiles. Our results indicate that there is evidence of this problem in the Colombian case; however, their negative effects on CUD are negligible.
The series Borradores de Economía is published by the Economic Studies Department at the Banco de la República (Central Bank of Colombia). The works published are provisional, and their authors are fully responsible for the opinions expressed in them, as well as for possible mistakes. The opinions expressed herein are those of the authors and do not necessarily reflect the views of Banco de la República or its Board of Directors.
