nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2017‒11‒26
nineteen papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Evaluating market consolidation in mobile communications By Genakos, Christos; Valletti, Tommaso; Verboven, Frank
  2. Excess reciprocity distorts reputation in online social networks By Livan, Giacomo; Caccioli, Fabio; Aste, Tomaso
  3. Fast Internet, digital vulnerabilities and firm performances in developing and transition countries By Joël CARIOLLE; Maëlan LE GOFF; Olivier SANTONI
  4. International banking and transmission of the 1931 financial crisis By Accominotti, Olivier
  5. The Gold Pool (1961-1968) and the Fall of the Bretton Woods System. Lessons for Central Bank Cooperation. By Michael Bordo; Eric Monnet; Alain Naef
  6. Segmentation versus agglomeration : competition between platforms with competitive sellers By Karle, Heiko; Peitz, Martin; Reisinger, Markus
  7. "Bitcoin als alternative Anlagemöglichkeit - unter besonderer Berücksichtigung der Volatilität" By Schmidt, Tim
  8. The Demand for Divisia Money: Theory and Evidence By Michael T. Belongia; Peter N. Ireland
  9. Problems and approaches in the legal regulation of the use of Bitcoin in Russia and in the world By Andrey Fedorovski; Rostislav Berlinskii; Vladislav Ashikhmin
  10. Stochastic counterfactual analysis for the vulnerability assessment of cyber-physical attacks on electricity distribution infrastructure networks By Edward Oughton
  11. Nowcasting the Local Economy: Using Yelp Data to Measure Economic Activity By Edward L. Glaeser; Hyunjin Kim; Michael Luca
  12. Book review: handbook on the economics of the internet By Mansell, Robin
  13. Factors Affecting the Intention to Use the Intelligent Personal Assistant By Chan-Woo Kim; Chang-Kyo Suh
  14. ‘Alternatives’ to austerity: a critique of financialized infrastructure in India and beyond By Bear, Laura
  15. The New Concept of Money: From Record-Of-Value (RoV) To Record-Of-Entropy (RoE) By Hegadekatti, Kartik
  16. From Wicksell to Le Bourva to Modern Monetary Theory: A Wicksell connection By Ehnts, Dirk; Barbaroux, Nicolas
  17. The Bank of England as Lender of Last Resort: New historical evidence from daily transactional data By Mike Anson; David Bholat Author-Name-First: David; Miao Kang; Ryland Thomas
  18. Speed 2.0: evaluating access to universal digital highways By Ahlfeldt, Gabriel M.; Koutroumpis, Pantelis; Valletti, Tommaso
  19. Mode of Entry into Hybrid Entrepreneurship: New Venture Start-Up versus Business Takeover By Xi, Guoqian; Block, Jörn; Lasch, Frank; Robert, Frank; Thurik, Roy

  1. By: Genakos, Christos; Valletti, Tommaso; Verboven, Frank
    Abstract: We study the dual relationship between market structure and prices and between market structure and investment in mobile telecommunications. Using a uniquely constructed panel of mobile operators’ prices and accounting information across 33 OECD countries between 2002 and 2014, we document that more concentrated markets lead to higher end user prices. Furthermore, they also lead to higher investment per mobile operator, though the impact on total investment is not conclusive. Our findings are not only relevant for the current consolidation wave in the telecommunications industry. More generally, they stress that competition and regulatory authorities should take seriously the potential trade-off between market power effects and efficiency gains stemming from agreements between firms.
    Keywords: mobile telecommunications; market structure; prices; investments; mergers
    JEL: F3 G3
    Date: 2017–06
  2. By: Livan, Giacomo; Caccioli, Fabio; Aste, Tomaso
    Abstract: The peer-to-peer (P2P) economy relies on establishing trust in distributed networked systems, where the reliability of a user is assessed through digital peer-review processes that aggregate ratings into reputation scores. Here we present evidence of a network effect which biases digital reputation, revealing that P2P networks display exceedingly high levels of reciprocity. In fact, these are much higher than those compatible with a null assumption that preserves the empirically observed level of agreement between all pairs of nodes, and rather close to the highest levels structurally compatible with the networks’ reputation landscape. This indicates that the crowdsourcing process underpinning digital reputation can be significantly distorted by the attempt of users to mutually boost reputation, or to retaliate, through the exchange of ratings. We uncover that the least active users are predominantly responsible for such reciprocity-induced bias, and that this fact can be exploited to obtain more reliable reputation estimates. Our findings are robust across different P2P platforms, including both cases where ratings are used to vote on the content produced by users and to vote on user profiles.
    JEL: G32 F3 G3
    Date: 2017–06–14
  3. By: Joël CARIOLLE (Ferdi); Maëlan LE GOFF (CEPII); Olivier SANTONI (Ferdi)
    Abstract: This paper provides city-level evidence on the impact of fast Internet on firm performances in developing and transition economies. Over the last two decades, international connectivity has been boosted by the laying of more than 300 sub-marine telecommunication cables (SMC). Almost all coastal developing and transition countries are henceforth plugged to the global Internet, so that the remaining structural impediments to Internet economy’s growth are twofold: first the digital isolation, i.e. the gap between Internet users and the existing and often lacking terrestrial telecommunication infrastructure network; and second, the country’s exposure to SMC faults. We estimate the impact of Internet access on firm performance by adopting an instrumental variable (IV) approach reflecting these two digital vulnerabilities. Estimations are carried out using large a sample of firms from more than 2,600 cities in some 60 developing and transition countries. They stress that a 10% increase in the incidence of e-mail use among firms, induced by lower digital vulnerabilities, raises the firm’s average annual sales by 24%, average sales per worker by 18%, and temporary employment by 15%. This result is robust to the exclusion of outliers, of exporters and big firms, of firms created after SMC arrival, and to the use of other proxies for firms’ access to Internet. It therefore suggests the existence of large spillover effects of fast Internet at the local level.
    Keywords: Internet, digital vulnerabilities, Developing countries, NICT, Submarine cables, infrastructures, telecommunications, firm performance
    Date: 2017–07
  4. By: Accominotti, Olivier
    Abstract: In May-July 1931, a series of financial panics shook Central Europe before spreading to the rest of the world. This paper explores how the 1931 Central European crisis propagated to the London and New York financial centers; it also examines the role of cross-border banking linkages in international crisis transmission. Using archival bank-level data, I document US and British banks' asset-side exposure to the crisis region. The Continental crisis disturbed few US banks but endangered several British financial institutions and triggered severe stress in the London money market. Central European credits were mostly held by large and diversified commercial banks in the United States and by small and geographically specialized financial institutions in Britain. Differences in the market structure of the trade finance industry explain why the 1931 Central European crisis infected London banks but not New York banks.
    Keywords: international contagion; cross-border banking; trade finance; 1931 crisis
    JEL: N0 F3 G3
    Date: 2016–11–21
  5. By: Michael Bordo; Eric Monnet; Alain Naef
    Abstract: The Gold Pool (1961-1968) was one of the most ambitious cases of central bank cooperation in history. Major central banks pooled interventions – sharing profits and losses – to stabilize the dollar price of gold. Why did it collapse? From at least 1964, the fate of the Pool was in fact tied to sterling, the first line of defense for the dollar. Sterling’s unsuccessful devaluation in November 1967 spurred speculation and massive losses for the Pool. Contagion occurred because US policies were inflationary and insufficiently credible as well. The demise of the Pool provides a striking example of contagion between reserve currencies.
    JEL: E42 F31 F33 N14
    Date: 2017–11
  6. By: Karle, Heiko; Peitz, Martin; Reisinger, Markus
    Abstract: For many products, platforms enable sellers to transact with buyers. We show that the competitive conditions among sellers shape the market structure in platform industries. If product market competition is tough, sellers avoid competitors by joining different platforms. This allows platforms to sustain high fees and explains why, for example, in some online markets, several homogeneous platforms segment the market. Instead, if product market competition is soft, agglomeration on a single platform emerges, and platforms fight for the dominant position. These insights give rise to novel predictions. For instance, market concentration and fees are negatively correlated in platform industries, which inverts the standard logic of competition.
    Keywords: intermediation , two-sided markets , market structure , price competition , endogenous segmentation
    JEL: L13 D43
    Date: 2017
  7. By: Schmidt, Tim
    Abstract: Die vorliegende Arbeit setzt sich mit dem Thema der Bitcoin als Kapitalanlage auseinander. Damit der Leser ein erforderliches Verständnis für die komplexe Thematik der Kryptowährung aufbaut, wird zunächst auf die Grundkonzeption der Bitcoin eingegangen. Hierbei erfolgt insbesondere eine Beschreibung des speziellen Peer-to-Peer- Netzwerk und die grundlegende Technologie der Blockchain. Die Analyse der Bitcoin als Anlageklasse beginnt mit der Preisentwicklung sowie der Untersuchung zugehöriger Einflussfaktoren auf Angebot und Nachfrage. Mittels einer Korrelationsanalyse werden die Bitcoin-Renditen anschließend ins Verhältnis zu traditionellen Anlageklassen gesetzt. Hinsichtlich der Fähigkeit, als krisenfestes Investment für Aktienkursrückgänge zu dienen, erfolgt eine historische Gegenüberstellung der Digitalwährung mit der Anlage in Gold. Hierfür werden die entsprechenden Kursentwicklungen während ausgewählter makroökonomischer und politischer Ereignisse der jüngeren Vergangenheit beobachtet. Die Untersuchung ergibt, dass die Anlageklassen Aktien und Gold eine überwiegend konträre Entwicklung aufweisen, was mit der negativen Korrelation erklärt werden kann. Unter zusätzlicher Zuhilfenahme einer Regressionsanalyse von S&P500 und Bitcoin-Preis-Index wird der kaum vorhandene Zusammenhang zwischen beiden Anlagen ersichtlich. Die ermittelten niedrigen Korrelationen zu den Vergleichsobjekten zeigen daher auf, dass die Bitcoin eine alternative und separate Anlageklasse darstellt. Unter Einbezug verschiedener deskriptiver Kennzahlen lässt sich zudem ableiten, dass die Bitcoin über ein hohes Risikopotenzial verfügt und primär als spekulative Anlage einzuordnen ist. Zur Quantifizierung dieses Risikos wird die Standardabweichung der Bitcoin-Renditen vom Erwartungswert gemessen. Die Untersuchungsergebnisse bestätigen dabei das enorme Risiko. Zur Bestimmung des tatsächlichen Verlustrisikos wird weiterhin auf das Risikomaß des Value-at-risk zurückgegriffen.
    Keywords: Bitcoin,Kapitalanlage,Kryptowährung,Peer-to-Peer-Netzwerk,Blockchain,Renditekorrelation,Volatilität,Anlageklassen,krisenfestes Investment,Risikofaktoren
    Date: 2017
  8. By: Michael T. Belongia (University of Mississippi); Peter N. Ireland (Boston College)
    Abstract: A money-in-the-utility function model is extended to capture the distinct roles of noninterest-earning currency and interest-earning deposits in providing liquidity services to households. It implies the existence of a stable money demand relationship that links a Divisia monetary aggregate to spending or income as a scale variable and the associated Divisia user-cost dual as an opportunity cost measure. Cointegrating money demand equations of this form appear in quarterly United States data spanning the period from 1967:1 through 2017:2, especially for the Divisia M2 aggregate. The identification of a stable money demand function over a period that includes the financial innovations of the 1980s and continues through the recent financial crisis and Great Recession suggests that a properly measured aggregate quantity of money can play a role in the conduct of monetary policy. That role can be of greater prominence when traditional interest rate policies are constrained by the zero lower bound.
    Keywords: Divisia monetary aggregates, money demand, money-in-the-utility function
    JEL: C43 E41
    Date: 2017–11–01
  9. By: Andrey Fedorovski (Immanuel Kant Baltic Federal University); Rostislav Berlinskii (Immanuel Kant Baltic Federal University); Vladislav Ashikhmin (Immanuel Kant Baltic Federal University)
    Abstract: The presentation is dedicated to problems and approaches in the legal regulation of the use of one of the cryptocurrencies - Bitcoin. Currently Bitcoin causes bigger interest among the world society, which is connected, in particular, with the highly increased exchange rate of this cryptocurrency. A number of countries have already formed a well-defined position and created a legal basis for development or for a complete or partial restriction of this cryptocurrency. But at the moment the most part of the world countries do not have a legal and regulatory framework of Bitcoin. In this presentation there is an analysis identifying pros and cons of this cryptocurrency and also the consequences of its further integration into the biggest world countries. Besides, our group has considered the experience of the number of countries in which the legal regulation of this cryptocurrency is established. The research offers a way for the further legal regulation of Bitcoin in Russia.
    Keywords: Bitcoin, cryptocurrency, legal regulation, world countries
    Date: 2017–10
  10. By: Edward Oughton (Cambridge Judge Business School, University of Cambridge)
    Abstract: In December 2015, a cyber-physical attack took place on the Ukrainian electricity distribution network. This is regarded as one of the first cyber-physical attacks on electricity infrastructure to have led to a substantial power outage and is illustrative of the increasing vulnerability of Critical National Infrastructure to this type of malicious activity. Few data points, coupled with the rapid emergence of cyber phenomena, has held back the development of resilience analytics of cyber-physical attacks, relative to many other threats. We propose to overcome data limitations by applying stochastic counterfactual analysis as part of a new vulnerability assessment framework. The methodology is developed in the context of the direct and indirect socio-economic impacts of a Ukrainian-style cyber-physical attack taking place on the electricity distribution network serving London and its surrounding regions. A key finding is that if decision-makers wish to mitigate population disruptions, then they must invest resources more-or-less equally across all substations, to prevent the scaling of a cyber-physical attack. However, there are some substations associated with higher economic value due to their support of other Critical National Infrastructures, such as airports or maritime ports, which justifies the allocation of additional cyber security investment to reduce the chance of cascading failure. Further cyber-physical vulnerability research must address the trade-offs inherent in a system made up of multiple institutions with different strategic risk mitigation objectives and metrics of value, such as governments, infrastructure operators and commercial consumers of infrastructure services.
    Date: 2017–11
  11. By: Edward L. Glaeser; Hyunjin Kim; Michael Luca
    Abstract: Can new data sources from online platforms help to measure local economic activity? Government datasets from agencies such as the U.S. Census Bureau provide the standard measures of local economic activity at the local level. However, these statistics typically appear only after multi-year lags, and the public-facing versions are aggregated to the county or ZIP code level. In contrast, crowdsourced data from online platforms such as Yelp are often contemporaneous and geographically finer than official government statistics. In this paper, we present evidence that Yelp data can complement government surveys by measuring economic activity in close to real time, at a granular level, and at almost any geographic scale. Changes in the number of businesses and restaurants reviewed on Yelp can predict changes in the number of overall establishments and restaurants in County Business Patterns. An algorithm using contemporaneous and lagged Yelp data can explain 29.2 percent of the residual variance after accounting for lagged CBP data, in a testing sample not used to generate the algorithm. The algorithm is more accurate for denser, wealthier, and more educated ZIP codes.
    JEL: E17 O33 R11
    Date: 2017–11
  12. By: Mansell, Robin
    Abstract: Handbook on the Economics of the Internet Bauer Johannes M & Latzer Michael (eds) Handbook on the Economics of the Internet, Edward Elgar Publishing: Cheltenham and Northampton, MA, 2016; 590 pp.: £205.00.
    JEL: N0
    Date: 2017–06–21
  13. By: Chan-Woo Kim (Kyungpook National University); Chang-Kyo Suh (Kyungpook National University)
    Abstract: An intelligent personal assistant (IPA) is a software agent that assists people to perform basic tasks or services for an individual, usually providing information via natural language. In spite of the versatile capabilities of the IPA to answer a user's simple information-based queries such as the weather and driving directions, the limited actual usage rates for the IPA services are reported so far. In this research, to evaluate the factors affecting the intention to use the IPA we develop the empirical model based on the technology acceptance model (TAM), innovation diffusion theory, and IS success model. Then, we collect the questionnaires from the actual users of the IPAs. Finally, the structural equation model validates the causal relationship between the constructs of the model. The major findings and suggestion for further research will be discussed in the conference in details.
    Keywords: IPA, TAM, Innovation Diffusion Theory, IS Success Model
    JEL: M15 M10
    Date: 2017–10
  14. By: Bear, Laura
    Abstract: Current infrastructure development across the globe is described as an ‘alternative’ to austerity and as a nationalist riposte to globalization. From the UK to India to the US, it is represented as a way of reviving the fortunes of the ‘common man’ and a dispossessed, male working class. This article, based on research in the waterscape of the Hooghly River in India and World Bank initiatives, argues that current policies of financialized infrastructure are a false alternative to austerity and are a continuation of a longer historical process. These policies have emerged from the gradual movement of fiscal control from governments to central banks, commercial banks and financial markets. This began with the financialization of sovereign debt in the 1980s–90s, which led to fiscal constraint within the public sector. Such policies eroded the material forms of state-provided public works and led to private sector accumulation through public-private partnerships and financial market speculation. Now governments are turning to commercial banks and financial markets to solve the problem of infrastructures starved of capital, even though it is the governance of the economy through these networks that has generated the current ‘infrastructure deficit’. Anthropologists now need to take part in public debates by revealing the financial predation on infrastructures and arguing for a renaming of them as citizens' commons for the public good. Ultimately, it is through a combination of ethnographies of austerity and analyses of the political economy of finance that anthropologists can challenge current inequalities.
    JEL: N0 F3 G3
    Date: 2017–10–03
  15. By: Hegadekatti, Kartik
    Abstract: In this paper, we shall analyse the concept of Money. Presently money is viewed as Record-of-Value i.e. money is used to capture value created in any activity. We start by defining money. Then we discuss the way energy is spent in creating value is measured using money. We also assess the uses of money by viewing it as a Record-of-Value entity. We discuss about the parallel economy which impacts mainstream economy in various ways. Economic Entropy is then defined and discussed. An equation that relates Economic Entropy, value based money and other economic parameters is proposed. The various advantages of viewing money as a Record-of-Entropy are debated. Finally, the paper concludes as to which concept is best suited to present day and future economic scenarios.
    Keywords: Money, Value, Entropy
    JEL: C50 C51 C81 C82 D46 D51 P24 P44
    Date: 2016–11–28
  16. By: Ehnts, Dirk; Barbaroux, Nicolas
    Abstract: In the aftermath of the Great Financial Crisis (GFC), and within the context of significant macroeconomic imbalances in the world economy, economists have shown renewed interest in the way central banks and financial systems work. The rise of Modern Monetary Theory (MMT) has relied on the examination of balance sheets, which has led to advancements in the understanding of the nuts and bolts of the financial system and the fundamental role of taxes, reserves, and deposits. While the school is associated with Post-Keynesian economics, we make the case that it could just as well be called Post-Wicksellian. The aim is not to argue for or against some label, but to make explicit the Wicksellian connection. In doing this, we bring forward old discussions and insights, which can be integrated into recent debates. MMT authors emphasize the importance of endogenous money and the examination of assets and liabilities in balance sheets. In our inquiry, we demonstrate that a horizontalist approach - adopted by MMT scholars - was already present in Wicksell (1898) and in the writings of French economist Jacques Le Bourva (1959, 1962). We examine the essential publications of the two authors and compare their views with the insights of MMT. By doing this, we hope to show continuity in monetary thought. MMT should not be seen as an intruder from the outside of monetary theory, but rather as a continuation and expansion of certain ideas that have long been part of the discipline. Identifying areas of disagreement between the three views should help bring clarity to the issues that are still disputed.
    Keywords: central banking,monetary policy,discretionary practices,Wicksell,Modern Monetary Theory,MMT
    JEL: E4 E51 E58
    Date: 2017
  17. By: Mike Anson; David Bholat Author-Name-First: David; Miao Kang; Ryland Thomas (Bank of England)
    Abstract: We use daily transactional ledger data from the Bank of EnglandÕs Archive to test whether and to what extent the Bank of England during the mid-nineteenth century adhered to Walter BagehotÕs rule that a central bank in a financial crisis should lend cash freely at a high interest rate in exchange for ÔgoodÕ securities. The archival data we use provides granular, loan-level insight on the price and quantity of credit, and information on its distribution to particular counterparties. We find that the BankÕs behaviour during this period broadly conforms to BagehotÕs rule, though with variation across the crises of 1847, 1857 and 1866. Using a new, higher frequency series on the BankÕs balance sheet, we find that the Bank did lend freely, with the number of discounts and advances increasing during crises. These loans were typically granted at a rate above pre-crisis levels and, in 1857 and 1866, typically at a spread above Bank Rate, though we also find some instances in the daily discount ledgers where individual loans were made below Bank rate in 1847. Another set of customer ledgers shows that the securities the Bank purchased were debts owed by a geographically and industrially diverse set of debtors. And using new data on the BankÕs income and dividends, we find the Bank and its shareholders profited from lender of last resort operations. We conclude our paper by relating our findings to contemporary debates including those regarding the provision of emergency liquidity to shadow banks.
    Keywords: Bank of England, lender of last resort, financial crises, financial history, central banking
    JEL: E58 G01 G18 G20 H12 N2 N4 N8
    Date: 2017–11
  18. By: Ahlfeldt, Gabriel M.; Koutroumpis, Pantelis; Valletti, Tommaso
    Abstract: This paper shows that having access to a fast Internet connection is an important determinant of capitalization effects in property markets. Our empirical strategy combines a boundary discontinuity design with controls for time-invariant effects and arbitrary macro-economic shocks at a very local level to identify the causal effect of broadband speed on property prices from variation that is plausibly exogenous. Applying this strategy to a micro data set from England between 1995 and 2010 we find a significantly positive effect, but diminishing returns to speed. Our results imply that disconnecting an average property from a high-speed first-generation broadband connection (offering Internet speed up to 8 Mbit/s) would depreciate its value by 2.8%. In contrast, upgrading such a property to a faster connection (offering speeds up to 24 Mbit/s) would increase its value by no more than 1%. We decompose this effect by income and urbanization, finding considerable heterogeneity. These estimates are used to evaluate proposed plans to deliver fast broadband universally. We find that increasing speed and connecting unserved households passes a cost-benefit test in urban and some suburban areas, while the case for universal delivery in rural areas is not as strong.
    Keywords: internet; property prices; capitalization; digital speed; universal access to broadband
    JEL: H4 L1 R2
    Date: 2017–07
  19. By: Xi, Guoqian (University of Trier); Block, Jörn (University of Trier); Lasch, Frank (Montpellier Business School); Robert, Frank (Montpellier Business School); Thurik, Roy (Erasmus University Rotterdam)
    Abstract: Many entrepreneurs start their ventures while retaining jobs in wage employment; this phenomenon is called hybrid entrepreneurship. Little is known about the entry modes (new venture start-up vs. business takeover) of hybrid entrepreneurs. Our study aims to close this gap by investigating the path to hybrid entrepreneurship. Using a large sample of French hybrid entrepreneurs, we show that educational attainment and management experience are associated with new venture start-up, whereas being female, having worker experience, and having received social benefits are linked to business takeover. With these results, our study contributes to research on hybrid entrepreneurship and entrepreneurship entry modes. Moreover, it informs policy makers about the nature of hybrid entrepreneurship and contributes to the design of effective policies to promote business takeover, which is of high interest, given the growing number of businesses seeking outside successors.
    Keywords: hybrid entrepreneurship, entrepreneurship entry mode, business takeover, new venture
    JEL: L26
    Date: 2017–10

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