nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2017‒08‒27
ten papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Restricting or Abolishing Cash: An Effective Instrument for Fighting the Shadow Economy, Crime and Terrorism? By Friedrich Schneider
  2. The FinTech Opportunity By Thomas Philippon
  3. Ethnic Discrimination on an Online Marketplace of Vacation Rental By Laouénan, Morgane
  4. The economics of distributed ledger technology for securities settlement By Benos, Evangelos; Garratt, Rodney; Gurrola-Perez, Pedro
  5. Central Bank Digital Currency and the Future of Monetary Policy By Michael D. Bordo; Andrew T. Levin
  6. Digital Economics By Avi Goldfarb; Catherine Tucker
  7. The impact of Basel III on money creation: A synthetic analysis By Xiong, Wanting; Wang, Yougui
  8. The effect of card payments on vat revenue in Greece By George Hondroyiannis; Dimitrios Papaoikonomou
  9. Das Privacy Paradox: Digitalisierung versus Privatsphäre By Engels, Barbara; Grunewald, Mara
  10. FinTech y el Futuro de la Banca Central By Pablo Furche; Carlos Madeira; Mario Marcel; Carlos Medel

  1. By: Friedrich Schneider
    Abstract: This paper has four goals: First, the use of cash as a possible driving factor of the shadow economy is investigated. Second, the use of cash in crime, here especially in corruption, is also econometrically investigated. The influence is somewhat larger than on the shadow economy, but it is certainly not a decisive factor for bribery activities. Some figures about organized crime are also shown; the importance of cash is diminishing. Third, some remarks about terrorism are made and here a cash limit doesn’t prevent terrorism. Fourth, some remarks are made about the restriction or abolishment of cash on civil liberties, with the result that this will extremely limit them. The conclusion of this paper is that cash has a minor influence on the shadow economy, crime and terrorism, but potentially a major influence on civil liberties.
    Keywords: cash, cash limit, shadow economy, crime, corruption, transnational crime organizations, financial proceeds, money laundering, illegal cross-border flows, tax fraud figures.
    Date: 2017–04
  2. By: Thomas Philippon
    Abstract: This paper assesses the potential impact of FinTech on the finance industry. I document first that financial services remain surprisingly expensive, which explains the emergence of new entrants. I then argue that the current regulatory approach is subject to significant political economy and coordination costs, and therefore unlikely to deliver much structural change. FinTech can improve both financial stability and access to services, but this requires significant changes in the focus of regulations.
    Keywords: FinTech, financial innovation, regulation, rents
    JEL: E2 G2 N2
    Date: 2017–07
  3. By: Laouénan, Morgane (CNRS, Centre d’Economie de la Sorbonne, Sciences-Po LIEPPAuthor-Name: Rathelot, Roland; University of Warwick, CEPR, CAGE)
    Abstract: We use data from an online marketplace of vacation rentals (Airbnb) collected in 19 major cities in North America and Europe to measure discrimination against ethnicminority hosts. This market has three interesting features: the existence of a detailed reviewing system, the high frequency of transactions and the panel dimension of the data. Using the fact that ratings provide potential guests with information about the quality of a listing, we build a credible measure of statistical discrimination, following a strategy a la ` Altonji and Pierret (2001). Hosts from a minority ethnic group charge 16% less than other hosts in the same cities. Controlling for a rich set of characteristics reduces the ethnic price gap to 3.2%. An additional review increases the daily price more for minority than for majority hosts. Estimating the parameters of a theoretical pricing model, we find that statistical discrimination accounts for most of the price differential: 2.5 percentage points.Keywords: ethnic discrimination, statistical discrimination, rental market JEL Classification: J15, L85
    Date: 2017
  4. By: Benos, Evangelos (Bank of England); Garratt, Rodney (University of California Santa Barbara); Gurrola-Perez, Pedro (Bank of England)
    Abstract: Distributed ledger technology (DLT) is a database architecture which enables the keeping and sharing of records in a distributed and decentralized way, while ensuring its integrity through the use of consensus-based validation protocols and cryptographic signatures. In principle, DLT has the potential to reduce costs and increase the efficiency of securities settlement, the ultimate step of every security transaction. In this paper, we first examine to what extent DLT could add value and change securities settlement. We then characterize the innovation process in the post-trade industry and finally, we describe the economics of a hypothetical DLT-based security settlement industry. Our main conclusions are that: i) DLT has the potential to improve efficiency and reduce costs in securities settlement, but the technology is still evolving and it is uncertain at this point what form, if any, a DLT-based solution for securities settlement will ultimately take, ii) technological innovation in the post-trade industry is more likely to achieve its potential with some degree of co-ordination which could be facilitated by the relevant authorities, and iii) if DLT-based securities settlement becomes a reality, then it is likely to be concentrated among few providers which, in the absence of regulation, could result in inefficient monopoly pricing or efficient price discrimination with service providers capturing much of the market surplus.
    Keywords: Distributed ledger; securities settlement; CSD; post-trade industry
    JEL: G23 L81 O32
    Date: 2017–08–18
  5. By: Michael D. Bordo; Andrew T. Levin
    Abstract: We consider how a central bank digital currency (CBDC) could transform all aspects of the monetary system and facilitate the systematic and transparent conduct of monetary policy. In particular, we find that CBDC can serve as a practically costless medium of exchange, secure store of value, and stable unit of account. To achieve these criteria, CBDC would be account-based and interest-bearing, and the monetary policy framework would foster true price stability.
    JEL: B12 B13 B22 E42 E52 E58 E63
    Date: 2017–08
  6. By: Avi Goldfarb; Catherine Tucker
    Abstract: Digital technology is the representation of information in bits. This technology has reduced the cost of storage, computation, and transmission of data. Research on digital economics examines whether and how digital technology changes economic activity. In this review, we emphasize the reduction in five distinct economic costs associated with digital economic activity: Search costs, replication costs, transportation costs, tracking costs, and verification costs.
    JEL: L81 L86 O33
    Date: 2017–08
  7. By: Xiong, Wanting; Wang, Yougui
    Abstract: Recent evidences provoke broad rethinking of the role of banks in money creation. The authors argue that apart from the reserve requirement, prudential regulations also play important roles in constraining the money supply. Specifically, they study three Basel III regulations and theoretically analyze their standalone and collective impacts. The authors find that 1) the money multiplier under Basel III is not constant but a decreasing function of the monetary base; 2) the determinants of the bank's money creation capacity are regulation-specific; 3) the effective binding regulation and the corresponding money multiplier vary across different economic states and bank balance sheet conditions.
    Keywords: money creation,Basel III,liquidity coverage ratio,capital adequacy ratio,leverage ratio,money multiplier
    JEL: E51 G28 G18 E60
    Date: 2017
  8. By: George Hondroyiannis (Bank of Greece and Harokopio University); Dimitrios Papaoikonomou (Bank of Greece)
    Abstract: The effect of card payments on VAT revenue performance in Greece is investigated using quarterly observations on card transactions during 2002q1-2016q2. Time-varying-coefficient methods are employed, in order to study the role of increasing card payments after the imposition of cash restrictions in July 2015. We find that (i) a 1pp increase in the share of card payments in private consumption results in approximately 1% higher revenue through increased compliance; (ii) lowering the VAT rate can generate revenue gains; (iii) card transactions may facilitate tax buoyancy. It is argued that stronger incentives for using card payments in tax evading industries can help lock-in the recent strong revenue performance when cash restrictions are lifted.
    Keywords: VAT; card payments; time-varying-coefficients; Greece
    JEL: E62 H21 H25 H26 K34
    Date: 2017–05
  9. By: Engels, Barbara; Grunewald, Mara
    Abstract: Wir shoppen online, kommunizieren über soziale Medien, nutzen Dating-Portale und Payback-Karten. Dabei geben wir eine Vielzahl an persönlichen Daten preis - und beschweren uns gleichzeitig über fehlenden Datenschutz.
    Date: 2017
  10. By: Pablo Furche; Carlos Madeira; Mario Marcel; Carlos Medel
    Date: 2017–08

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