Economics Dictionary of ArgumentsHome
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| Payment systems: Payment systems are the infrastructure and rules that enable the transfer of monetary value between parties in an economy. They include the institutions, instruments (like cash, cards, or digital wallets), and technologies that facilitate financial transactions, ensuring smooth commerce and economic activity. See also International trade, Financial sanctions._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Oleg Itskhoki on Payment Systems - Dictionary of Arguments
Itskhoki I 10 Payment Systems/Itskhoki/Ribakova: (…) payment system sanctions may result in significant barriers and disrupt trade flows with third countries. In conventional macrotrade analysis, payment system sanctions have no effect provided the country has access to elastic spot currency markets. However, this is not the case in the new generation of models with limited elasticity of substitution in the currency market. Empirical evidence suggests that sanctions that restrict payment system have a substantial bite in practice, and hence highlight the need to work with such frameworks. Finally, we discuss the important policy issue of the optimal sanctions mix. >Sanctions, >Sanctions consequences, >Sanctions debate, >Sanctions effectiveness, >Sanctions evasion, >Sanctions history, >Sanctions policies, >Sanctions theory, >Trade sanctions, >Financial sanctions. Itskhoki I 20 Payment system sanctions: An understudied area is the role of payment system sanctions.* In standard economic models, payment systems are taken for granted, and usually do not affect either trade flows or asset flows. However, in practice payment systems prove to be very important, as their disruption makes trade transaction impossible, even when trade is balanced and does not require intertemporal financing. Furthermore, enforcement of such sanctions via the banking system might be significantly less costly than enforcement of trade sanctions in the corporate sector, as we discuss below. A related topic concerns frictions in the use of third-country currencies in settling international transactions when transactions with western currencies are sanctioned. This calls for the development of novel models that focus on the transaction costs associated with clearance of international payments. Tight payment system sanctions bring the outcome closer to a barter equilibrium where trade must be balanced across all trading partners, limiting the scope for gains from international trade. * For recent work on payment system sanctions see Livdan et al. (2024)(1). 1. Livdan, Dmitry, Norman Schürhoff, and Vladimir Sokolov. 2024. “The Economic Impact of Payment System Stress: Evidence from Russia.” Working Paper._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Itskhoki I Oleg Itskhoki Elina Ribakova The Economics of Sanctions: From Theory Into Practice. Brookings Papers on Economic Activity, Fall 2024. The Brookings Institution 2024 |
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