Economic Quarterly

1997

 

Summer 1997

The Check Float Puzzle

Jeffrey M. Lacker

Check collection has a puzzling feature. The collecting bank earns one day's additional interest by presenting a check to the paying bank one day sooner. The puzzle is that it is difficult to identify a commensurate social benefit associated with presenting a check one day earlier. Collecting banks face distorted incentives to clear checks rapidly, resulting in wasted resources.



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