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Functions of the Fed

Functions of the Fed . Check-Clearing Cash Processing Electronic Payments. Spencer Curtis January 19, 2006. All three are related in that they all involve cash flows in the economy and often the cash flows in and out of the central bank. All are becoming or using electronic methods.

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Functions of the Fed

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  1. Functions of the Fed Check-Clearing Cash Processing Electronic Payments Spencer Curtis January 19, 2006

  2. All three are related in that they all involve cash flows in the economy and often the cash flows in and out of the central bank. All are becoming or using electronic methods.

  3. Check Clearing Movement of funds, credit, and debit due to use of checks. Check Clearing for the 21st Century Act • October 28, 2004 • substitute checks and check truncation • Money creation

  4. Cash Processing • Becoming more and more electronically based • Process by which money flows from debtors to creditors/ consumers to producers.

  5. Electronic Payments • Search for more efficient way of payment The estimated cost to the banking industry of operating the entire check clearing system range from approximately ¼ to 1 percent of GDP² • Eliminates time and transportation costs Implications for E-money • ↓ reserve requirements • ∆ monetary policy 2. http://www.federalreserve.gov/boarddocs/speeches/2001/20011205/default.htm (estimate came from a lecture by Governor Laurence H. Meyer

  6. E-Payment Continued Types of E-Payments • ATM • Debit and Credit Cards • PIN CHIP (Clearing House Interbank Payment System) (Private Banking Sector) & Fedwire • Any bank that has an account with the Federal Reserve for Fedwire • Has processed over 108 million funds transfers with $3.5 million per transaction average as of 2000

  7. Conclusion • With the development of the internet, electronic money, and electronic payments time lags between the flow of cash/the amount of actual paper money in the economy is dimishing. • This could cause a change in the actions of the Fed or the way in which Monetary Policy is implemented

  8. Bibliography • http://www.tgbr.com/tgbr/terms.html#c (definition of Check Clearing) • http://ingrimayne.saintjoe.edu/econ/Banking/CheckingClearing.html (Check Clearing info) • http://www.federalreserve.gov/paymentsystems/truncation/default.htm (check 21 info) • http://www.federalreserve.gov/boarddocs/speeches/2001/20011205/default.htm (lecture on evolution of money) • http://www.loomisfargo.com/checkpro_1.htm (cash processing specific)

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