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on Monetary Economics |
| By: | Corinna Ghirelli (BANCO DE ESPAÑA); Javier J. Pérez (BANCO DE ESPAÑA); Daniel Santabárbara (BANCO DE ESPAÑA) |
| Abstract: | This paper investigates the relationship between inflation and GDP growth forecast errors and the expected monetary policy stance in the euro area during the monetary policy cycle of 2022-2024, when inflation was well above the ECB’s target. Under rational expectations, forecasts of monetary contractions should be unrelated to subsequent inflation and growth forecast errors. On the contrary, we find that expected monetary policy tightening has been associated with higher than projected GDP growth, suggesting a lower monetary policy effect than that factored in by (ECB/Eurosystem and IMF) forecasters. In other words, forecasters overestimated the monetary multiplier. At the same time, monetary policy tightening has been associated with lower than expected inflation, suggesting an underestimation of the monetary multiplier on inflation. Putting these two stylized facts together implies that forecasters overestimated the sacrifice ratio during the last monetary policy tightening cycle. Our findings suggest that forecasters may have inaccurately perceived the recent inflationary crisis in the euro area as predominantly supply-driven, underestimating its demand-driven component. This led to the belief that monetary policy in the euro area would be exceedingly costly in terms of output. |
| Keywords: | forecast errors, monetary policy multipliers, sacrifice ratio |
| JEL: | C53 E27 E62 E52 E58 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2516 |
| By: | Douglas Kiarelly Godoy de Araujo; Nikola Bokan; Fabio Alberto Comazzi; Michele Lenza |
| Abstract: | Word embeddings are vectors of real numbers associated with words, designed to capture semantic and syntactic similarity between the words in a corpus of text. We estimate the word embeddings of the European Central Bank's introductory statements at monetary policy press conferences by using a simple natural language processing model (Word2Vec), only based on the information and model parameters available as of each press conference. We show that a measure based on such embeddings contributes to improve core inflation forecasts multiple quarters ahead. Other common textual analysis techniques, such as dictionary-based metrics or sentiment metrics do not obtain the same results. The information contained in the embeddings remains valuable for out-of-sample forecasting even after controlling for the central bank inflation forecasts, which are an important input for the introductory statements. |
| Keywords: | embeddings, inflation, forecasting, central bank texts |
| JEL: | E31 E37 E58 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1253 |
| By: | Michal Marencak; Giang Nghiem |
| Abstract: | Using granular household-level spending data from the ECB Consumer Expectations Survey, we document new stylized facts on the heterogeneity of personally realized inflation across different inflation regimes in the euro area. During the period of low inflation (April 2020 – April 2021) and the period of sticky inflation (January 2024 – October 2024), homeowners, high-income households, and older individuals experienced lower inflation. However, during the inflation surge (July 2021 – October 2023), this pattern reversed as rising energy and food prices disproportionately affected these groups, outweighing their lower spending shares in these categories. Personally experienced inflation accounts for a significant share of the variation in inflation perceptions, inflation expectations, and broader macroeconomic expectations, including personal income expectations. Moreover, these relationships differ notably across inflation regimes. |
| Keywords: | personal inflation rate, expectations, consumer expectations survey |
| JEL: | C33 D84 E31 E52 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-17 |
| By: | Jonas D. M. Fisher; Leonardo Melosi; Sebastian Rast |
| Abstract: | Professional forecasters’ long-run inflation expectations overreact to news and exhibit persistent, predictable biases in forecast errors. A model incorporating overconfidence in private information and a persistent expectations bias—which generates persistent forecast errors across most forecasters—accounts for these two features of the data, offering a valuable tool for studying long-run inflation expectations. Our analysis highlights substantial, time- varying heterogeneity in forecasters’ responses to public information, with sensitivity declining across all forecasters when monetary policy is constrained by the effective lower bound. The model provides a framework to evaluate whether policymakers’ communicated inflation paths are consistent with anchored long-run expectations. |
| Keywords: | Panel survey data; long-run inflation expectations; rationality; expectation bias; overconfidence; overreaction; central bank communications; anchoring |
| JEL: | E31 D83 E52 E37 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:829 |
| By: | Philippe Andrade; Erwan Gautier; Eric Mengus; Emanuel Moench |
| Abstract: | We study beliefs about fiscal dominance using a survey of German households. We first design and conduct a randomized controlled trial to identify how fiscal news impacts individuals’ debt-to-GDP and inflation expectations. We document that the link between debt and inflation crucially depends on individuals’ views about the fiscal space. News leading individuals to expect a higher debt-to-GDP ratio makes them more likely to revise their inflation expectations upward. These average effects are driven by individuals who think that fiscal resources are stretched. By contrast, individuals who think there is fiscal space do not associate debt with inflation. We then introduce a New Keynesian model in which agents have heterogeneous beliefs about the fiscal space. We show that such a heterogeneity of beliefs implies a policy tradeoff for the central bank: Agents who expect fiscal dominance in the future exert upward pressure on inflation, which the central bank should partially tolerate due to the real costs of completely stabilizing prices. |
| Keywords: | inflation expectations; fiscal and monetary policy; heterogeneous beliefs; randomized controlled trial; survey data |
| JEL: | E31 E52 H60 D84 |
| Date: | 2025–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedbwp:99721 |
| By: | Junko Koeda (Graduate School of Economics, Waseda University); Bin Wei (Research Department, Federal Reserve Bank of Atlanta) |
| Abstract: | In this paper, we examine the effectiveness of outcome-based forward guidance, a key monetary policy tool that links a central bank’s policy decisions to specific economic outcomes. We develop a novel macro-finance shadow rate term structure model that incorporates unspanned macro factors and an outcome-based liftoff condition. To assess the effectiveness of forward guidance, we propose a novel method that decomposes the shadow rate into components attributable to forward guidance and other unconventional monetary policies. Using maximum likelihood estimation with an extended Kalman filter, we apply the model to both the United States and Japan. Our findings demonstrate that outcome-based forward guidance is effective, delivering significant monetary easing effects on the real economy during both effective lower bound periods of the global financial crisis and the COVID-19 pandemic in the US, as well as during Japan’s era of unconventional monetary policy. |
| Keywords: | forward guidance, effective lower bound (ELB), liftoff, term structure, shadow rate, macro finance, unspanned macro factors |
| JEL: | E43 E44 E52 E58 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:wap:wpaper:2423 |
| By: | Jonathan J Adams (Department of Economics, University of Florida); Symeon Taipliadis (Department of Economics, University of Florida) |
| Abstract: | Some inflation forecast errors are predictable. Economic theory predicts that these belief distortions affect the business cycle. How should monetary policy respond? We investigate this question with a model-free approach using high-frequency monetary policy shocks and a structural VAR method to identify the effects of shocks to belief distortions. Belief distortion shocks are contractionary: if households become overly pessimistic about inflation, then unemployment and deflation follow. Intuitively, the optimal policy response is to ease. This is most effective with short-term rates; we find that a $1$ p.p. increase in the belief distortion is optimally offset by a $0.85$ p.p. surprise interest rate decrease. Monetary policy targeting longer-term rates is less effective but also useful. |
| JEL: | E52 E30 D84 E70 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ufl:wpaper:001016 |
| By: | Diaf, Sami; Zakane, Ahmed |
| Abstract: | Gauging the impact of oil price variations on small, oil-exporting countries has been heavily investigated under the umbrella of monetary policy interventions, using a standard general equilibrium framework. For some countries, the monetary policy coordinates with fiscal policy to deliver a better response to external oil shocks in an attempt to make the economic activity resilient to external backlash. This paper investigates the policy mix effectiveness in a small open economy, namely Algeria, and its ability to mitigate a negative oil price shock, using a DSGE model that maps several frictions found in single-commodity economies as for a managed exchange rate regime, the existence of a foreign exchange market accessible to households and a sovereign wealth fund. Simulations show countercyclical fiscal measures (increase in government spending) coupled with monetary interventions have no expansionary effects on output, but still necessary to maintain a resilient economic activity especially for the non-oil sector. Under the sticky prices assumption, households tend to lower their investment and consumptions levels, in addition of using their foreign currency savings as buffer. This results in alleviating potential pressures on the supply side and preventing possible inflation spikes. Findings confirm the effectiveness of a monetary policy based on targeting export products, to better handle the negative terms of trade shock via a slight exchange rate depreciation. However, the fiscal dominance in the policy-mix leads to the accumulation of public debt, which might require fiscal consolidation during protracted periods of declining oil prices. |
| Keywords: | monetary policy; fiscal policy; exchange rate; oil prices; external shock |
| JEL: | E31 E52 E63 F31 F41 H54 H63 Q35 Q38 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpm:dynare:083 |
| By: | Giovanni Favara; Francesca Loria; Egon Zakrajšek |
| Abstract: | We use Zip code–level Statistics of Income data from the Internal Revenue Service to measure the distribution of income within U.S. metropolitan areas from 1998 through 2019. Exploiting geographic variation in income distribution over time, we study how unanticipated changes in the monetary policy stance shape the subsequent dynamics of income inequality. The results show that monetary policy persistently affects labor income inequality and that these distributional effects are amplified significantly in weak local labor markets. |
| Keywords: | income inequality; distributional impact of monetary policy; high-frequency monetary policy surprises; local labor markets |
| JEL: | E21 E52 E58 |
| Date: | 2025–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedbwp:99602 |
| By: | Masashige Hamano; Philip Schnattinger; Kongphop Wongkaew |
| Abstract: | We develop a New Keynesian model to analyze how shifts in consumer preferences toward online retailers affect pricing dynamics and inflation. Our framework incorporates goods market search frictions between retailers and producers, with distinct search efficiencies for online and brick-and-mortar retailers. Since search incurs costs, retailers pass these costs on to consumers, creating a wedge between consumer and producer prices. Our analysis identifies two key channels through which these frictions influence inflation: the composition channel, driven by the reallocation of purchases between retailer types with different search efficiencies, and the arbitrage channel, reflecting changes in market tightness due to shifting demand. Bayesian estimation shows that increased consumer preference for online retail lowers CPI inflation by increasing the share of goods purchased through search-efficient retailers while reducing market tightness in brick-and-mortar retail, thereby narrowing the price wedge. |
| Keywords: | Search and matching friction; CPI inflation; Firm dynamics |
| JEL: | E31 E52 J64 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:pui:dpaper:230 |
| By: | Teerapap Pangsapa; Thanaphol Kongphalee; Maneerat Gongsiang |
| Abstract: | This paper examines the complex relationship between monetary policy and household debt dynamics in Thailand. Using a household debt law of motion framework, we decompose changes in the household debt-to-GDP ratio into two key components: net new borrowing and the Fisher effect. Our analysis reveals that monetary policy creates significant intertemporal trade-offs in managing household debt. While monetary easing reduces the debt service burden in the short term, it simultaneously stimulates new borrowing, potentially leading to higher debt accumulation over time. Employing both local projection methods and Bayesian vector autoregression models, we further demonstrate that these policy effects are state-dependent. Monetary policy's long-term trade-off is substantially weaker during high-leverage periods compared to low-leverage environments, suggesting potential policy benefits in high-debt contexts where new borrowing is already constrained. Our results highlight the importance of considering credit cycle conditions when implementing monetary policy. |
| Keywords: | Household debt; Credit cycle; Monetary policy |
| JEL: | E52 G50 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:pui:dpaper:231 |
| By: | Andres F. Martinez; Will Paterson; Jonathan Greenacre |
| Keywords: | Finance and Financial Sector Development-E-Finance and E-Security |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wboper:41058 |
| By: | Yu, Haoyang; Sun, Yutong; Liu, Yulin; Zhang, Luyao |
| Abstract: | Historically, gold and silver have played distinct roles in tra- ditional monetary systems. While gold has primarily been revered as a superior store of value, prompting individuals to hoard it, silver has com- monly been used as a medium of exchange. As the financial world evolves, the emergence of cryptocurrencies has introduced a new paradigm of value and exchange. However, the store-of-value characteristic of these digital assets remains largely uncharted. Charlie Lee, the founder of Lite- coin, once likened Bitcoin to gold and Litecoin to silver. To validate this analogy, our study employs several metrics, including unspent transac- tion outputs (UTXO), spent transaction outputs (STXO), Weighted Average Lifespan (WAL), CoinDaysDestroyed (CDD), and public on-chain transaction data. Furthermore, we’ve devised trading strategies centered around the Price-to-Utility (PU) ratio, offering a fresh perspective on crypto-asset valuation beyond traditional utilities. Our back-testing re- sults not only display trading indicators for both Bitcoin and Litecoin but also substantiate Lee’s metaphor, underscoring Bitcoin’s superior store-of-value proposition relative to Litecoin. We anticipate that our findings will drive further exploration into the valuation of crypto assets. For enhanced transparency and to promote future research, we’ve made our datasets available on Harvard Dataverse and shared our Python code on GitHub as open source. |
| Date: | 2023–07–31 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:t2fku_v1 |
| By: | Mario Cerrato; Shengfeng Mei |
| Abstract: | Cooperman et al. (2025) show that the covariance of banks’ funding costs and credit line drawdowns is debt overhang cost to the bank’s equity holders (Myres, 1974). In this paper, we start from this important result and extend it by showing that central banks’ quantitative easing (QE) can mitigate this cost. We focus on the COVID-19 shock. We show empirically that funding costs generate frictions related to banks’ shareholders (debt overhang cost), and banks transfer the cost to the credit lines’ prices. Our novel econometric analysis, event studies, and theory suggest and formalise its mechanism. Our findings shed further light on the intricate relationship between banks’ funding costs and related debt overhang (Andersen et al. 2019), but, crucially, focusing on an important source of credit for firms: credit lines. |
| Keywords: | Quantitative Easing, Central Bank, Debt Overhang, Credit Line |
| JEL: | G01 G21 G28 G32 E44 E58 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:gla:glaewp:2025_03 |
| By: | Rongyu Wang (Information Research Institute, Qilu University of Technology (Shandong Academy of Sciences) and University of Edinburgh Author Name: Tim Worrall; School of Economics, University of Edinburgh) |
| Abstract: | This paper considers a repeated version of the International Monetary System model of Fahri and Maggiore (2018) without a direct default cost. Issuance of a safe asset by the Hegemon is sustained by a no-default condition that trades off the short-term benefit of default against the continuation value of not defaulting. In this model, it is optimal for the Hegemon to maintain a constant issuance. The constant issuance policy may however, be unstable. In particular, the no-default condition links current issuance to issuance in the previous period. If the Hegemon adopts a simple, but short-sighted, heuristic rule that bases current issuance on the issuance in the previous period, then the constant issuance policy is unstable. If however, the Hegemon uses a heuristic that targets the demand for risky assets from the rest of the world, then the corresponding equilibrium is stable. |
| Keywords: | International Monetary System; Reserve Currency; Safe Asset; Triffen Dilemma; Instability |
| JEL: | C61 F33 G15 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:edn:esedps:318 |
| By: | Linda Glawe (University of Rostock); Jamel Saadaoui (University Paris 8); Can Xu (China Merchants Group) |
| Abstract: | This paper investigates nonlinearities in the inflation-growth-uncertainty relationship in Chinese provinces over the period 1992 to 2017 using nonlinear models and dynamic panel threshold models. We find that for the full sample period (1992–2017), inflation rates exceeding 9.7% are associated with a positive growth effect (β2 = 0.03). Below this threshold, the correlation is insignificant. Since inflation rates above 9.7% were mainly observed in the early to mid-1990s, we restrict the sample to 1999–2017. In this period, the inflation threshold lowers to approximately 5.1%. Moreover, the relationship between inflation and growth shifts across the two regimes: below 5%, inflation is positively associated with growth (β1 = 0.01), while above 5%, the effect turns negative and statistically insignificant. We further explore whether the effect of inflation on growth could be affected by uncertainty at the provincial level. For that purpose, we combine two recent uncertainty indices for the Chinese economy that are based on Chinese newspapers. We find that inflation only has a positive effect on growth for low-levels of uncertainty. For high-levels of uncertainty, the effect of inflation on growth turns negative and statistically insignificant. |
| Keywords: | Inflation, economic growth, Chinese economy, nonlinearities, uncertainty, dynamic panel threshold models |
| JEL: | E |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:inf:wpaper:2025.4 |
| By: | Tom Barkin |
| Abstract: | Labor market conditions remain solid, while inflation remains somewhat elevated. It makes sense to stay modestly restrictive until we are more confident inflation is returning to our 2 percent target. I recognize the fight against inflation has been long. But it is critical that we remain steadfast. It is tempting to focus on gaming out short-term factors, but it’s hard to make significant monetary policy changes amidst such uncertainty. So, I prefer to wait and see how this uncertainty plays out and how the economy responds. |
| Keywords: | Business cycles; economic growth; inflation; monetary policy |
| Date: | 2025–02–25 |
| URL: | https://d.repec.org/n?u=RePEc:fip:r00034:99625 |
| By: | Vladimir Sokolov (National Research University Higher School of Economics); Alexey Gorodilov (National Research University Higher School of Economics) |
| Abstract: | We examine the relationship between net revaluations of foreign currency-denominated assets and liabilities and banks' liquidity creation. Our findings reveal a significant effect on FX-USD liquidity creation: revaluations enhance liquidity creation on the asset side but diminish it on the liability side, leading to a total neutral effect. Subsample analysis reveals that banks with positive FX mismatches face liquidity destruction in FX-USD liabilities during exchange rate shocks, whereas negatively FX-mismatched banks use these shocks to extend long-term FX loans, balancing total liquidity creation. For accounts denominated in the domestic currency, no significant effects of net revaluations are observed for liquidity creation on the full sample. For positively FX-mismatched banks net revaluations enhance total liquidity creation, while for negatively FX-mismatched banks reduce it, resulting in an overall neutral outcome for domestic currency liquidity creation. Furthermore, regulatory capital moderates the impact of revaluations on liquidity creation through the financial fragility mechanism. These results underscore the complex interplay of currency risks, balance sheet FX mismatches, and regulatory dynamics in influencing liquidity creation in emerging markets. |
| Keywords: | liquidity creation, currency revaluation, bank’s capital, foreign currency mismatch |
| JEL: | G21 G28 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hig:wpaper:99/fe/2025 |
| By: | Stefano Maria Corbellini |
| Abstract: | This paper analyzes the monetary policy trade-off between defending purchasing power of consumers and keeping moderate debt cost for borrowers, in the framework of a heterogeneous agent New Keynesian open economy hit by a foreign energy price shock. Raising the interest rate indeed combats the loss in purchasing power due to the energy shock through a real exchange rate appreciation: however, this comes at the expense of higher interest payments for debtors. The trade-off can be resolved by adopting a milder interest rate policy during the crisis in exchange for a prolonged contraction beyond the energy shock time span. This interest rate smoothing approach allows to still experience a real appreciation today, while spreading the impact on debt costs more evenly over time. This policy counterfactual is analyzed in a quantitative model of the UK economy under the 2022-2023 energy price hike, where the loss of consumers’ purchasing power and the vulnerability of mortgage costs to higher policy rates have been elements of paramount empirical relevance. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:ube:dpvwib:dp2502 |
| By: | ONISHI Fuyuko (Bank of Japan); HIRAI Yuichiro (Bank of Japan); ARUGA Ryo (Bank of Japan); BESSHO Hidemi (Bank of Japan) |
| Abstract: | In the foreign exchange market, electronic trading (e-FX) has developed and expanded, bringing benefits such as lower trading costs and more trading options. To take advantage of these benefits, e-FX customers need to choose appropriate trading venues and methods. In addition, the development of e-FX has led to a fragmentation of liquidity in the foreign exchange market, making it more difficult to monitor market trends, and there are concerns that price discovery in the foreign exchange market may be undermined in the future. Furthermore, as the e-FX infrastructure advances internationally, the presence of the Tokyo market as a financial center may be affected, involving an outflow of foreign exchange transactions. |
| Keywords: | Foreign Exchange Market; Electronic Trading; Market Structure |
| JEL: | F31 G12 G15 |
| Date: | 2025–03–24 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojrev:rev25e04 |
| By: | Degryse, Hans; Huylebroek, Cédric; Van Doornik, Bernardus |
| Abstract: | Regulators increasingly rely on supervisory technologies (SupTech) to enhance bank supervision, but their potential role in disciplining bank behavior remains unclear. We address this knowledge gap using unique data from the SupTech application of the Central Bank of Brazil. We show that, after a SupTech event, banks reveal inconsistencies in their risk reporting and tighten credit to less creditworthy firms, effectively reducing risk-taking. This credit tightening in turn has small spillovers on less creditworthy firms borrowing from affected banks. Our results can be explained by a moral suasion channel, offering novel insights into the role of SupTech in bank supervision. |
| Keywords: | Bank supervision, SupTech, Bank risk-taking, Bank lending, Real effects |
| JEL: | G21 G28 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bofitp:314419 |
| By: | Heidorn, Thomas; Liem, Erik; Requardt, Stefan; Wahnschaap, Tim |
| Abstract: | This paper examines the transition from LIBOR to SOFR in the US and maps out the consequences for European corporate treasurers by showing how the application of SOFR in cash products and derivatives differs from LIBOR. As interest rate and cross-currency swaps transition to compounded SOFR, corporates may face a trade-off between the higher costs of using Term SOFR versus facing operational difficulties with their internal treasury systems when using compounded SOFR in arrears. With respect to European corporates, challenges arising from the new in arrears conventions should be less pronounced since EURIBOR coexists next to €STR, which means that corporates may continue to use term rates set in advance when they choose to swap U.S. dollar exposure into euros. |
| Keywords: | LIBOR, Benchmark Reform, SOFR, Term SOFR, RFRs, Interest Rate Swaps, Cross Currency Swap, Corporate Treasury |
| JEL: | G12 G23 G28 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:fsfmwp:314425 |
| By: | Raul J. Crespo |
| Abstract: | The study uses an indirect statistical approach to detect whether prices diverted from the market fundamentals in the hyperinflation episodes that took place in Latin American economies during the 1980s and more recently in Venezuela in the 2010s. The statistical methodology is a recursive unit root test that seeks to distinguish between periods where the time series of interest are difference-stationary from periods in which they exhibit explosive behaviour. The right-tailed unit root tests are applied to the time series of inflation rates and money growth rates finding supporting evidence of explosive behaviour in the former and nonexplosive behaviour in the latter in countries such as Argentina, Peru and Venezuela. The statistical approach successfully identifies historical periods of price-level bubbles and collapses over some of the hyperinflationary periods being studied. |
| Date: | 2025–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:bri:uobdis:25/785 |
| By: | Carin van der Cruijsen; Jakob de Haan |
| Abstract: | This paper proposes a payment literacy index, developed using a comprehensive consumer survey in the Netherlands to assess knowledge of both traditional and new payment methods, as well as fraud in the payment system. The index suggests that there is considerable room for improvement in payment literacy. Payment literacy is influenced by a number of personal characteristics, the information sources used, experiences with fraud, and the desire to be well informed about payments. Our findings suggest a positive relationship between payment literacy and trust in the payment system and banks, as well as the likelihood of individuals adopting new payment methods and making payments independently. |
| Keywords: | payment literacy; payments; financial inclusion; financial literacy; trust |
| JEL: | D12 D83 G50 J16 J33 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:831 |
| By: | Chemnyongoi, Hellen; Omanyo, Daniel |
| Abstract: | Kenya, like most countries in Sub-Saharan Africa, has faced and coped with multiple shocks amid reduced fiscal headroom and increasing public debt vulnerabilities. Other than the COVID-19 global health crisis and the resulting economic effects, Kenya faced the desert locust invasion in 2020, prolonged droughts in 2021 and 2022, and the accompanying high cost of living exacerbated by the spill-over effects of the Russian-Ukraine war. These developments came when the economy had inadequate domestic resources to sustain the post-COVID-19 recovery momentum, and the mounting debt levels constrained the ability to raise new funding.Following a series of recurrent shocks, the International Monetary Fund (IMF) supported member countries substantially. This support took multiple forms, including the Rapid Credit Facility (RCF), the Rapid Financing Instrument (RFI) and Resilience and Sustainability Trust (RST), which provided emergency loans to low-income and middle-income countries facing urgent balance of payments needs. Most importantly, the IMF approved issuing $650 billion in special drawing rights (SDRs) in August 2021 to help member countries supplement their foreign exchange reserves and finance their balance of payments needs during the pandemic. However, data from IMF shows that about two-thirds (US$420 billion) of the allocation went to developed economies. Further, statistics show that developing economies have a greater dependence on SDRs than developed economies, with net SDR positions showing significant differentiation in utilization rates between the two. CEPAL and ECA (2022) noted that developing economies have an SDR utilization rate of 42.9%, while developed economies have a utilization rate of 5.9%. In addition, low voting rights in developing countries limit their participation in the decision-making process where voting power counts. As a result, the low-income countries that need more resources and SDR allocations to address their liquidity challenges are disadvantaged. |
| Date: | 2024–04–02 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:1dce321c-f1cd-42e2-8316-03bc3a0fbeea |
| By: | Krüger, Malte; Seitz, Franz |
| Abstract: | Payment costs for consumers are difficult to determine, are not recorded in an internationally harmonized manner and vary significantly from country to country. They are incurred in many forms, for example as fees for account management, for cash withdrawals at ATMs or for payment cards; but also as financial damage in the event of loss or fraud. On the other hand, this also includes time costs, e.g. for cash withdrawals or the payment process, and costs of data disclosure. To determine the total costs and for international comparisons, different key figures are calculated, such as the cost per transaction, as a percentage of the transaction value or relative to GDP. After clarifying the concept of costs, the focus of our paper is on a critical review of the literature on cost studies at the consumer level. In particular, the results of existing work are compared, the most important cost categories are identified and sensitivity analyses are carried out. We find some key cost drivers and show how the results are driven by key assumptions. |
| Keywords: | cash, debit card, credit card, costs, consumer |
| JEL: | D12 E41 E42 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:imfswp:314427 |