nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2016‒08‒28
eight papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. "Telecom Branding in Pakistan: Network Coverage or Value Added Services" By Siddiqui, Dr. Kamran Ahmed; Ali, Mazhar; Sarki, Irshad Hussain; Khuhro, Rafique Ahmed
  2. Nowcasting Nominal GDP with the Credit-Card Augmented Divisia Monetary Aggregates By William Barnett; Marcelle Chauvet; Danilo Leiva-Leon; Liting Su
  3. Provider Payment Methods and Incentives By Randall P. Ellis; Bruno Martins; Michelle McKinnon Miller
  4. The monsoon and the market for money in late-colonial India By Tirthankar Roy
  5. The credit card debt puzzle: the role of preferences, credit risk, and financial literacy By Gorbachev, Olga; Luengo-Prado, Maria Jose
  6. Enhancing ICT for Inclusive Human Development in Sub-Saharan Africa By Simplice Asongu; Sara Le Roux
  7. Financial literacy: A barrier to seek financial advice but not a shield against following it By Sprenger, Julia
  8. The I Theory of Money By Markus K. Brunnermeier; Yuliy Sannikov

  1. By: Siddiqui, Dr. Kamran Ahmed; Ali, Mazhar; Sarki, Irshad Hussain; Khuhro, Rafique Ahmed
    Abstract: Purpose – This study explores the factors of telecom branding in Pakistan. Design/methodology/approach – Survey methodology was used to collect the data and a total of 238 mobile phone users were interviewed for their telecom brand preferences. Findings – Exploratory factor analyses and cross tabulations were used to measure the results, four major antecedents were extracted, Brand Association, Brand Premium, Brand Communication and Brand Loyalty. Cross tabs show wider differences in male and female customers for their perceptions towards bases of telecom branding. Secondly, three factors were identified as shaping the telecom branding i.e. Network coverage, Value added services and Pricing strategies while in subsequent quests value added services were emerged as major factor for retaining consumer mindset for telecom branding. Research limitations/implications – A few strengths of social research; the universal use of self-reporting questionnaires, and use of students in the research process, which make the process robust and economically feasible, are actually highly criticized in different nonacademic quarters. Practical implications – The findings point to various implications for practicing managers especially those who are responsible for segmentation, targeting and positioning their services. Originality/value – Although there are many studies on brand preferences; research on telecom brand antecedents is very limited. This research adds significant value by dissemination of knowledge on the subject area.
    Keywords: Telecom, Mobile Phone, Services, Branding, Marketing, Pakistan
    JEL: M30
    Date: 2015–06
  2. By: William Barnett (Department of Economics, The University of Kansas; Center for Financial Stability, New York City; IC2 Institute, University of Texas at Austin); Marcelle Chauvet (University of California at Riverside); Danilo Leiva-Leon (Central Bank of Chile); Liting Su (Department of Economics, The University of Kansas;)
    Abstract: While credit cards provide transactions services, as do currency and demand deposits, credit cards have never been included in measures of the money supply. The reason is accounting conventions, which do not permit adding liabilities, such as credit card balances, to assets, such as money. However, economic aggregation theory and index number theory measure service flows and are based on microeconomic theory, not accounting. We derive theory needed to measure the joint services of credit cards and money. Carried forward rotating balances are not included in the current period weakly separable block, since they were used for transactions services in prior periods. The theory is developed for the representative consumer, who pays interest for the services of credit cards during the period used for transactions. This interest rate is reported by the Federal Reserve as the average over all credit card accounts, including those not paying interest. Based on our derived theory, we propose an empirical measurement of the joint services of credit cards and money. These new Divisia monetary aggregates are widely relevant to macroeconomic research.1 We evaluate the ability of our money aggregate measures to nowcast nominal GDP. This is currently topical, given proposals for nominal GDP targeting, which require monthly measures of nominal GDP. The nowcasts are estimated using only real time information, as available for policy makers at the time predictions are made. We use a multivariate state space model that takes into account asynchronous information inflow, as proposed in Barnett, Chauvet, and Leiva-Leon (2016). The model considers real time information that arrives at different frequencies and asynchronously, in addition to mixed frequencies, missing data, and ragged edges. The results indicate that the proposed parsimonious model, containing information on real economic activity, inflation, and the new augmented Divisia monetary aggregates, produces the most accurate real time nowcasts of nominal GDP growth. In particular, we find that inclusion of the new aggregate in our nowcasting model yields substantially smaller mean squared errors than inclusion of the previous Divisia monetary aggregates.
    Keywords: Credit Cards, Money, Credit, Aggregation Theory, Index Number Theory, Divisia Index, Risk, Asset Pricing, Nowcasting, Indicators.
    JEL: C43 C53 C58 E01 E3 E40 E41 E51 E52 E58 G17
    Date: 2016–08
  3. By: Randall P. Ellis (Boston University); Bruno Martins (Boston University); Michelle McKinnon Miller (Loyola Marymount University)
    Abstract: Diverse provider payment systems create incentives that affect the quantity and quality of health care services provided. Payments can be based on provider characteristics, which tend to minimize incentives for quality and quantity. Or payments can be based on quantities of services provided and patient characteristics, which provide stronger incentives for quality and quantity. Payments methods using both broader bundles of services and larger numbers of payment categories are growing in prevalence. The recent innovation of performance-based payment attempts to target payments on key patient attributes so as to improve incentives, better manage patients, and control costs.
    Keywords: Provider payment, fees schedules, Diagnosis Related Groups (DRG), moral hazard, selection, capitation, incentives, risk adjustment
    Date: 2015–08–12
  4. By: Tirthankar Roy
    Abstract: Banking experienced large growth in colonial India along with a process of commercialization of agriculture. Yet, the rate of aggregate saving or investment remained low. This article is an attempt to resolve this paradox. It suggests that traditional forms of banking were helped by the formalization of indigenous negotiable instruments, but that transactions between bankers, merchants, and peasants were characterized by a limited use of legal instruments. The limited circulation of bills in this sphere is attributed, among other factors, to high seasonality in the demand for money. Seasonality-induced distortions in the organization of the money market made indigenous banking an unsuitable agent to promote saving and finance industrialization.
    JEL: N0 F3 G3
    Date: 2016–06
  5. By: Gorbachev, Olga (University of Delaware); Luengo-Prado, Maria Jose (Federal Reserve Bank of Boston)
    Abstract: We use the 1979 National Longitudinal Survey of Youth to revisit what is termed the credit card debt puzzle: why consumers simultaneously co-hold high-interest credit card debt and low-interest assets that could be used to pay down this debt. This dataset contains unique information on intelligence, financial literacy, and preferences, while also providing a complete picture of households’ balance sheets. Relative to individuals with no credit card debt but positive liquid assets, individuals in the puzzle group have higher discount rates, slightly lower financial literacy scores, and very different perceptions on future credit risk: many individuals are using credit cards for precautionary motives.
    Keywords: household finance; risk aversion; time preferences; precautionary motives; bankruptcy; foreclosure
    JEL: D14 D91 E21 G02
    Date: 2016–07–07
  6. By: Simplice Asongu (Yaoundé/Cameroun); Sara Le Roux (Oxford Brookes University, Oxford)
    Abstract: This study assesses if increasing information and communication technology (ICT) enhances inclusive human development in a sample of 49 countries in Sub-Saharan Africa for the period 2000-2012. The empirical evidence present in this study, is based on instrumental variable Tobit regressions, in order to account for simultaneity and the limited range in the dependent variable. In the interest of increasing room for policy implications and controlling for the unobserved heterogeneity, the analysis is decomposed into the fundamental characteristics that human development based on: income levels, legal origins, religious dominations, political stability, landlockedness and resource-wealth. Our findings show that policies designed to boost ICT (mobile phone, internet, telephone) penetration will increase inclusive development in the post-2015 sustainable development agenda. The degree of positive responsiveness of inclusive development to ICT varies across fundamental characteristics of human development and ICT dynamics. The study has substantial policy relevance because the adoption and/or penetration rate of ICT can be influenced by policy to achieve inclusive development outcomes. Further policy implications are also discussed.
    Keywords: ICT; Inclusive human development; Africa
    JEL: G20 I10 I32 O40 O55
    Date: 2016–08
  7. By: Sprenger, Julia
    Abstract: The current study examines individual decision making in the field of personal finance. How do people arrive at a financial decision? A laboratory experiment investigates the way external information is integrated into the decision-making process. Financial literacy shows to lower demand for financial advice but it does not immunize against sunk cost fallacies: High financial literate subjects are not less likely to follow financial advice than less literate subjects, even when the quality of advice is moderate. Overconfidence biases the perceived need for information. Both results point to difficulties in making an informed choice.
    Abstract: Dieses Papier untersucht individuelle Entscheidungsprozesse im Bereich Finanzen. Wie gelangen Menschen zu einer finanziellen Entscheidung? Ein Laborexperiment untersucht, wie externe Informationen in den Entscheidungsprozess integriert werden. Die Ergebnisse zeigen, dass ein hohes Niveau an financial literacy die Nachfrage nach Ratschlägen senkt. Es bewahrt aber nicht davor, einer sunk cost fallacy zu unterliegen. Menschen mit sehr hoher financial literacy sind nicht weniger geneigt einem Ratschlag in einer finanziellen Entscheidungssituation zu folgen als Menschen mit einer geringen financial literacy, und zwar auch dann nicht, wenn die Qualität dieses Ratschlags nur moderat ist. Außerdem zeigen die Ergebnisse, wie der wahrgenommene Bedarf an Informationen durch overconfidence verzerrt wird. Beide Ergebnisse zeigen, inwiefern der Anspruch, eine fundierte Entscheidung zu treffen für Individuen mit Schwierigkeiten verbunden ist, selbst wenn eine Vielzahl externer Informationen verfügbar ist.
    Keywords: Financial literacy,overconfidence,financial decision making,experiment,advice
    JEL: C91 G02 D83
    Date: 2016
  8. By: Markus K. Brunnermeier; Yuliy Sannikov
    Abstract: A theory of money needs a proper place for financial intermediaries. Intermediaries diversify risks and create inside money. In downturns, micro-prudent intermediaries shrink their lending activity, fire-sell assets and supply less inside money, exactly when money demand rises. The resulting Fisher disinflation hurts intermediaries and other borrowers. Shocks are amplified, volatility spikes and risk premia rise. Monetary policy is redistributive. Accommodative monetary policy that boosts assets held by balance sheet-impaired sectors, recapitalizes them and mitigates the adverse liquidity and disinflationary spirals. Since monetary policy cannot provide insurance and control risk-taking separately, adding macroprudential policy that limits leverage attains higher welfare.
    JEL: E32 E41 E44 E51 E52 E58 G01 G11 G21
    Date: 2016–08

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