We develop a dynamic multi-agent model of an interbank payment system where banks choose their level of available funds on the basis of private payoff maximisation. The model consists of the repetition of a simultaneous move stage game with incomplete information, incomplete monitoring, and stochastic payoffs. Adaptation takes place with bayesian updating, with banks maximizing immediate payoffs. We carry out numerical simulations to solve the model and investigate two special scenarios: an operational incident and exogenous throughput guidelines for payment submission. We find that the demand for intraday credit is an S-shaped function of the cost ratio between intraday credit costs and the costs associated with delaying payments. We also find that the demand for liquidity is increased both under operational incidents and in the presence of effective throughput guidelines.
View on arXiv