REGULATING CHECK USE IN TURKEY

Tümen S.

CENTRAL BANK REVIEW, vol.12, no.1, pp.1-12, 2012 (ESCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 12 Issue: 1
  • Publication Date: 2012
  • Journal Name: CENTRAL BANK REVIEW
  • Journal Indexes: Emerging Sources Citation Index (ESCI), TR DİZİN (ULAKBİM)
  • Page Numbers: pp.1-12
  • Keywords: Checks, Regulation, Monopoly, Heterogeneous preferences
  • TED University Affiliated: No

Abstract

This paper develops a simple model of the market for checks in Turkey. The Central Bank controls the lump-sum amount that the drawee banks are legally responsible to pay per bad check. An increase in this amount is believed to support real economy. I show that banks will tend to restrict the quantity of checks when this responsibility is increased. A percentage point increase in banks' obligation per bad check could lead up to a 1.7% decline in the total supply of checks on the margin. This means that a rise in this obligation may harm the real economy rather than providing support.