Payment economics: studying the mechanics of exchange

The five papers that follow this essay were presented at the Federal Reserve Bank of Richmondʹs Conference on Payment Economics held October 23–24, 2000, in Williamsburg, Virginia. The conference was motivated by the convergence of lines of research in monetary and banking theory that are focused on the institutional arrangements that facilitate exchange. At the same time, central bank policymakers concerned about the efficiency implications of their involvement in and regulation of clearing and settlement arrangements increasingly seek an economic understanding of these activities. It appears that a distinct and coherent field of inquiry is emerging, focused on the mechanics of exchange. This field, which we call payment economics, studies both the instruments agents use to make payments and the central role of bank intermediation in facilitating the use of private liabilities in exchange.