nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2018‒03‒05
nineteen papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. On the Economics of Digital Currencies By Fernandez-Villaverde, Jesus; Sanches, Daniel R.
  2. Monetary theory reversed: Virtual currency issuance and miners’ remuneration By Luca Marchiori
  3. Mobile banking usage, quality of growth, inequality and poverty in developing countries By Asongu, Simplice; Odhiambo, Nicholas
  4. The role of technology in mortgage lending By Fuster, Andreas; Plosser, Matthew; Schnabl, Philipp; Vickery, James
  5. Bridging the rural digital divide By OECD
  6. The Application of Artificial Intelligence at Chinese Digital Platform Giants: Baidu, Alibaba and Tencent By Jia, Kai; Kenney, Martin; Mattila, Juri; Seppälä, Timo
  7. The Role of Openness in the Effect of ICT on Governance By Asongu, Simplice; Nwachukwu, Jacinta
  8. Estimating Heterogeneous Consumer Preferences for Restaurants and Travel Time Using Mobile Location Data By Susan Athey; David Blei; Robert Donnelly; Francisco Ruiz; Tobias Schmidt
  9. Pros and Cons of the Impact Factor in a Rapidly Changing Digital World By Michael McAleer; Judit Olah; Jozsef Popp
  10. Controlling working crowds: The impact of digitalization on worker autonomy and monitoring across hierarchical levels By Michael Beckmann; Lutz Bellmann; Elisa Gerten
  11. Back to the future: Changing job profiles in the digital age By Lorenz, Hanno; Stephany, Fabian
  12. Predicting the Volatility of Cryptocurrency Time–Series By Leopoldo Catania; Stefano Grassi; Francesco Ravazzolo
  13. Internet Use and the U-shaped relationship between Age and Well-being By Fulvio Castellacci; Henrik Schwabe
  14. Money in Spain. New historical statistics. 1830-1998 By Pablo Martín-Aceña
  15. Do short-term rent platforms affect rents? Evidence from Airbnb in Barcelona By Segú, Mariona
  16. On the determinants of bitcoin returns: a LASSO approach By Theodore Panagiotidis; Thanasis Stengos; Orestis Vravosinos
  17. Reserve Currency Blocs: A Changing International Monetary System? By Camilo E Tovar Mora; Tania Mohd Nor
  18. Honesty in the digital age By Alain Cohn; Tobias Gesche; Michel Maréchal
  19. Online News and Protest Participation in a Political Context: Evidence from Self-Reported Cross-Sectional Data By Nora A. Kirkizh; Olessia Y. Koltsova

  1. By: Fernandez-Villaverde, Jesus (University of Pennsylvania); Sanches, Daniel R. (Federal Reserve Bank of Philadelphia)
    Abstract: Can a monetary system in which privately issued cryptocurrencies circulate as media of exchange work? Is such a system stable? How should governments react to digital currencies? Can these currencies and government-issued money coexist? Are cryptocurrencies consistent with an efficient allocation? These are some of the important questions that the sudden rise of cryptocurrencies has brought to contemporary policy discussions. To answer these questions, we construct a model of competition among privately issued .at currencies. We .nd that a purely private arrangement fails to implement an efficient allocation, even though it candeliver price stability under certain technological conditions. Currency comptition creates problems for monetary policy implementation under conventional methods. However, it is possible to design a policy rule that uniquely implements an efficient allocation by driving private currencies out of the market. We also show that unique implementation of an efficient allocation can be achieved without government intervention if productive capital is introduced.
    Keywords: Currency competition; cryptocurrencies; monetary policy
    JEL: E40 E42 E52
    Date: 2018–02–02
  2. By: Luca Marchiori
    Abstract: This study analyzes the macroeconomic implications of virtual currency issuance. It builds on a standard cash-in-advance model extended with (i) ‘virtual’ goods, sold against virtual currency, and (ii) miners, the agents providing payment services. The main finding is that virtual currency growthmay have effects opposite to those predicted by monetary theory when miners are rewarded with newly created coins. Declining currency issuance, as in Bitcoin, raises the price of virtual goods, which counteracts the traditional impact of a reduced inflation tax. The paper also shows how fiat money growth affects the welfare effects of virtual currency creation.
    Keywords: Cash-in-advance, virtual currency, fiat money, money supply
    JEL: E41 E42 E51
    Date: 2018–02
  3. By: Asongu, Simplice; Odhiambo, Nicholas
    Abstract: The transition from Millennium Development Goals to Sustainable Development Goals has substantially shifted the policy debate from development to inclusive development. Using interactive quantile regressions, we examine the correlations between mobile banking and inclusive development (quality of growth, inequality and poverty) among individuals in 93 developing countries for the year 2011. Mobile banking entails: ‘mobile used to pay bills’ and ‘mobile used to receive/send money’. The findings broadly show that increasing mobile banking dynamics to certain thresholds would increase (decrease) quality of growth (inequality) in quantiles at the high-end of inclusive development distributions for the most part. The study is original in that it explores the relationship between mobile banking and inclusive development using three measurements of inclusive development, namely: quality of growth, inequality and poverty. As a main policy implication, encouraging mobile banking applications would play a substantial role in responding to the challenges of immiserizing growth, inequality and poverty in developing countries.
    Keywords: Mobile banking; Quality of growth; Poverty; Inequality; Developing countries
    JEL: G20 I10 I20 I32 O40
    Date: 2017–01
  4. By: Fuster, Andreas (Federal Reserve Bank of New York); Plosser, Matthew (Federal Reserve Bank of New York); Schnabl, Philipp (NYU Stern School of Business, NBER, and CEPR); Vickery, James (Federal Reserve Bank of New York)
    Abstract: Technology-based (“FinTech”) lenders increased their market share of U.S. mortgage lending from 2 percent to 8 percent from 2010 to 2016. Using market-wide, loan-level data on U.S. mortgage applications and originations, we show that FinTech lenders process mortgage applications about 20 percent faster than other lenders, even when controlling for detailed loan, borrower, and geographic observables. Faster processing does not come at the cost of higher defaults. FinTech lenders adjust supply more elastically than other lenders in response to exogenous mortgage demand shocks, thereby alleviating capacity constraints associated with traditional mortgage lending. In areas with more FinTech lending, borrowers refinance more, especially when it is in their interest to do so. We find no evidence that FinTech lenders target marginal borrowers. Our results suggest that technological innovation has improved the efficiency of financial intermediation in the U.S. mortgage market.
    Keywords: mortgage; technology; prepayments; nonbanks
    JEL: D14 D24 G21 G23
    Date: 2018–02–01
  5. By: OECD
    Abstract: This document examines recent policy and technology approaches to bridging the digital divide in rural and remote areas in OECD countries. First, it discusses issues related to assessing broadband gaps, defining speeds and establishing national targets. Second, it describes policies being implemented to improve both access and uptake, such as fostering competition, promoting national, rural and community-led broadband initiatives, supporting open access policies and reducing deployment costs. Finally, it briefly reviews technological developments that are likely to influence the provision of services in underserved areas. Experience in OECD countries with fibre optics, coaxial cable, copper, fixed and mobile wireless, satellites and hybrid approaches, as well as with emerging technologies, are used to illustrate some of the technological trends discussed. This document also includes a summary of common challenges and good practices to bring improved communication services to individuals and communities in rural and remote areas.
    Date: 2018–02–23
  6. By: Jia, Kai; Kenney, Martin; Mattila, Juri; Seppälä, Timo
    Abstract: Abstract The Chinese digital platform giants – Baidu, Alibaba and Tencent – have quickly risen to be amongst the most notable developers and users of artificial intelligence. One important catalyst for this development has been the so-called Platform Business Group (PBG) strategy used by Chinese digital platform firms. In this strategy a platform firm aims to develop powerful synergies by tightly linking together a number of different platforms it owns so as to offer multiple services to users under its umbrella. By applying the PBG strategy, Baidu, Alibaba, and Tencent are able to exploit enormous multi-faceted datasets on individuals for use in the development of artificial intelligence algorithms. As a result, the Chinese platform giants appear to be taking a somewhat different approach with the development and use of artificial intelligence than their Western counterparts. If the Chinese platform giants succeed in their efforts to expand into the global market, their business strategies will introduce a different threat to the conventional European industries from those challenges already presented by Apple, Amazon, Facebook, Google, and Microsoft.
    Keywords: Artificial Intelligence, Platforms, Platform Business Group strategy, Baidu, Alibaba, Tencent
    JEL: L8 L86 O3 O33
    Date: 2018–02–26
  7. By: Asongu, Simplice; Nwachukwu, Jacinta
    Abstract: The study investigates how openness influences information and communication technology (ICT) penetration for improved government quality in sub-Saharan Africa for the period 2000-2012. Openness is measured in terms of trade and financial globalisation whereas ICT is proxied with mobile phone and internet penetration rates. Ten bundled and unbundled governance indicators are used. The empirical evidence is based on Generalised Method of Moments with forward orthogonal deviations. The main findings are: First, financial openness has an edge over trade openness when combined with ICT to affect both economic and institutional governance. Second, mobile phones have an edge over internet penetration in complementing (i) trade openness for economic governance and (ii) financial openness for institutional governance. Third, net effects on political governance are consistently negative. Taken together, in the short-run, openness-driven ICT policies are more rewarding in terms of economic and institutional governance than political governance. Fourth, catch-up in governance is facilitated by the interaction between openness and ICT. Contributions of these findings to literature are discussed.
    Keywords: Openness; ICT; Governance; Africa
    JEL: F40 O38 O40 O55 P37
    Date: 2017–01
  8. By: Susan Athey; David Blei; Robert Donnelly; Francisco Ruiz; Tobias Schmidt
    Abstract: This paper analyzes consumer choices over lunchtime restaurants using data from a sample of several thousand anonymous mobile phone users in the San Francisco Bay Area. The data is used to identify users' approximate typical morning location, as well as their choices of lunchtime restaurants. We build a model where restaurants have latent characteristics (whose distribution may depend on restaurant observables, such as star ratings, food category, and price range), each user has preferences for these latent characteristics, and these preferences are heterogeneous across users. Similarly, each item has latent characteristics that describe users' willingness to travel to the restaurant, and each user has individual-specific preferences for those latent characteristics. Thus, both users' willingness to travel and their base utility for each restaurant vary across user-restaurant pairs. We use a Bayesian approach to estimation. To make the estimation computationally feasible, we rely on variational inference to approximate the posterior distribution, as well as stochastic gradient descent as a computational approach. Our model performs better than more standard competing models such as multinomial logit and nested logit models, in part due to the personalization of the estimates. We analyze how consumers re-allocate their demand after a restaurant closes to nearby restaurants versus more distant restaurants with similar characteristics, and we compare our predictions to actual outcomes. Finally, we show how the model can be used to analyze counterfactual questions such as what type of restaurant would attract the most consumers in a given location.
    Date: 2018–01
  9. By: Michael McAleer (Asia University, Taiwan; University of Sydney Business School, Australia; Erasmus University Rotterdam, The Netherlands); Judit Olah (University of Debrecen, Hungary); Jozsef Popp (University of Debrecen, Hungary)
    Abstract: The purpose of the paper is to present arguments for and against the use of the Impact Factor (IF) in a rapidly changing digital world. The paper discusses the calculation of IF, as well as the pros and cons of IF. Editorial policies that affect IF are examined, and the merits of open access online publishing are presented. Scientific quality and the IF dilemma are analysed, and alternative measures of impact and quality are evaluated. The San Francisco declaration on research assessment is also discussed.
    Keywords: Impact Factor; Quality of research; Pros and Cons; Implications; Digital world; Editorial policies; Open access online publishing; SCIE; SSCI
    JEL: O34 O31 D02
    Date: 2018–02–16
  10. By: Michael Beckmann; Lutz Bellmann; Elisa Gerten (University of Basel)
    Abstract: This study investigates the impact of information and communication technologies (ICT) on worker autonomy and monitoring using the second wave of the German Linked Personnel Panel, a linked employer-employee data set. From a theoretical point of view, the impact of ICT on workplace organization is ambiguous. On the one hand, the fast diffusion of ICT among employees makes it possible to monitor professional activities, leading to greater centralization. On the other hand, ICT enable employees to work more autonomously, so that workplace organization becomes more decentralized. We find indeed evidence for the argument that both centralization and decentralization tendencies might appear simultaneously. If modern digital technologies are used for work, worker monitoring is increasing for all employees, but only managerial employees gain in autonomy. The use of instrumental variables estimation tightens our results in a manner that ICT increases both worker autonomy and monitoring, but only for managerial employees, where the ICT effect on autonomy exceeds the corresponding ICT effect on monitoring. All in all, our results support the view that digitalization unlike prior technological revolutions primarily affects the employment prospects and working conditions for employees at higher hierarchical levels.
    JEL: L22 M54 O33
    Date: 2018
  11. By: Lorenz, Hanno; Stephany, Fabian
    Abstract: In light of increasingly "smarter" technologies, the future of (human) labour is questioned on a daily basis. A study by Frey and Osborne (2013), one of the most recognised contributions in this domain, estimated that half of the US labour force is highly susceptible to computerisation in the near future. Their findings have been applied for several follow-up investigations in other countries. However, the transferability of the results is limited by the set-up of the study. In contrast to previous investigations, our approach tries to overcome past shortcomings by collecting assessments on the susceptibility to digital technologies for the Austrian labour market by Austrian experts. We show that the diversity of previous findings regarding the degree of job automatisation is to a large extent driven by model selection and not by controlling for personal characteristics or tasks. Our results indicate that while clerical computer-based routine jobs are likely to change in the next decade, professional activities, e.g., the processing of complex information, are prone to digital change.
    Keywords: Bayesian,Classification,Employment,GLM,Technological Change
    JEL: E24 J24 J31 J62 O33
    Date: 2018
  12. By: Leopoldo Catania; Stefano Grassi; Francesco Ravazzolo
    Abstract: Cryptocurrencies have recently gained a lot of interest from investors, central banks and governments worldwide. The lack of any form of political regulation and their market far from being “efficient”, require new forms of regulation in the near future. From an econometric viewpoint, the process underlying the evolution of the cryptocurrencies’ volatility has been found to exhibit at the same time differences and similarities with other financial time–series, e.g. foreign exchanges returns. This short note focuses on predicting the conditional volatility of the four most traded cryptocurrencies: Bitcoin, Ethereum, Litecoin and Ripple. We investigate the effect of accounting for long memory in the volatility process as well as its asymmetric reaction to past values of the series to predict: one day, one and two weeks volatility levels.
    Date: 2018–02
  13. By: Fulvio Castellacci (TIK Centre for Technology, Innovation and Culture, University of Oslo); Henrik Schwabe (TIK Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: Extant research shows that the relationship between age and well-being is U-shaped. This paper investigates the effects of Internet use on subjective well-being over the life cycle. We argue that Internet use moderates the U-shaped relationship, affecting its turning point and slopes. We use the Eurobarometer annual surveys for the years 2010 to 2013, which provide rich information for close to 100,000 individuals in all European countries. The econometric analysis exploits exogenous variation in broadband Internet take-up across European countries, and presents 2SLS estimations for a recursive bivariate ordered probit model. The results provide support for our main hypothesis. Active Internet users have a different well-being pattern over the life cycle compared to other individuals. Specifically, we find that Internet users experience: (1) a more stable level and less pronounced decrease in life satisfaction in their younger adult life; and (2) an earlier and stronger recovery after the turning point of the U-shape.
    Date: 2018–02
  14. By: Pablo Martín-Aceña (Universidad de Alcalá)
    Abstract: The purpose of this Working Paper is to present a reconstruction of the main monetary aggregates for the period 1830, when the first modern banknotes were issue, to1998, the last year before the substitution of the peseta by the euro. It offers series for currency in circulation and its components, bank deposits and its components, high-powered money and the money supply. With regard to previous monetary historical statistics, this Working Paper improves the quality and the time-span of the series, covering a period of more than 150 years. The Working Paper offers also a short approach to the long-term evolution of the quantity of money in Spain and the changes in its composition. The sources and methodology employed is explain in detail.
    Keywords: monetary statistics, monetary history, currency in circulation, bank deposits, money supply
    JEL: E49 E51 N1 N9 Y1
    Date: 2018–02
  15. By: Segú, Mariona
    Abstract: Peer-to-peer platforms such as airbnb have recently entered the market thanks to the development of new technologies and their influence on traditional markets remains still understudied. Similarly, the multiplicity of local regulations adopted by big touristic cities in developed countries shows a lack of consensus both on the consequences and on the role of regulation. However, the actual impact of airbnb’s market entry on rents remains still unknown. I assess the causal impact of the beginning of airbnb’s economic activity on housing rents for the city of Barcelona using a Bartiklike instrumental strategy. Results suggest that airbnb is responsible for a 4% increase in rents.
    Keywords: Housing rents, short term rentals, airbnb
    JEL: R10 R20 R31
    Date: 2018–02
  16. By: Theodore Panagiotidis (Department of Economics, University of Macedonia, Greece; Rimini Centre for Economic Analysis); Thanasis Stengos (University of Guelph, Canada; Rimini Centre for Economic Analysis); Orestis Vravosinos (Barcelona Graduate School of Economics, Spain)
    Abstract: We examine the significance of twenty-one potential drivers of bitcoin returns for the period 2010 to 2017 (2,533 daily observations). Within a LASSO framework, we examine the effects of factors such as stock market returns, exchange rates, gold and oil returns, FED’s and ECB’s rates and internet trends on bitcoin returns for alternate time periods. Search intensity and gold returns emerge as the most important variables for bitcoin returns.
    Keywords: bitcoin, cryptocurrency, exchange rate, returns, LASSO
    JEL: G12 G15
    Date: 2018–02
  17. By: Camilo E Tovar Mora; Tania Mohd Nor
    Abstract: What is the extent of currency diversification in the international monetary system? How has it evolved over time? In this paper, we quantify the degree of currency diversification using regression methods of currency co-movements to determine the extent to which national currencies across the world belong to a reserve currency bloc. We then use these estimates to calculate the economic size of each currency bloc. A key contribution of our paper is that we quantify the size of the Chinese renminbi bloc. Our analysis suggests that the international monetary system has transitioned from a bi-polar system - consisting of the U.S. dollar and the euro - to a tri-polar one that includes the renminbi. The dollar bloc is estimated to continue to dominate, having the largest share in global GDP (40 percent), followed by the renminbi (30 percent) and the euro blocs (20 percent). The geographical area of influence for the RMB bloc appears to be most evident among the BRICS’ currencies. The British pound and the Japanese yen blocs appear to play minor roles.
    Keywords: Economic integration;Foreign exchange;International monetary system;Currency Bloc, Internatinal Monetary System, International Monetary Arrangements and Institutions, Financial Aspects of Economic Integration, Open Economy Macroeconomics
    Date: 2018–01–24
  18. By: Alain Cohn; Tobias Gesche; Michel Maréchal
    Abstract: Modern communication technologies enable efficient exchange of information, but often sacrifice direct human interaction inherent in more traditional forms of communication. This raises the question of whether the lack of personal interaction induces individuals to exploit informational asymmetries. We conducted two experiments with 866 subjects to examine how human versus machine interaction influences cheating for financial gain. We find that individuals cheat significantly more when they interact with a machine rather than a person, regardless of whether the machine is equipped with human features. When interacting with a human, individuals are particularly reluctant to report unlikely favorable outcomes, which is consistent with social image concerns. The second experiment shows that dishonest individuals prefer to interact with a machine when facing an opportunity to cheat. Our results suggest that human interaction is key to mitigating dishonest behavior and that self-selection into communication channels can be used to screen for dishonest people.
    Keywords: Cheating, honesty, private information, communication, digitization, lying costs
    JEL: C99 D82 D83
    Date: 2018–02
  19. By: Nora A. Kirkizh; Olessia Y. Koltsova
    Abstract: The availability of alternative information via online news sources is often said to induce social discontent, especially in states, where traditional media are under state control. But does this relation really exist, and is it universal? In contrast to previous studies, where generalized Internet use is treated as a proxy for online news consumption and general political participation is a proxy for protest participation, we render a test of relationship specifically between online news and protest participation. We explore survey data from WVS for 48 nations in 2010-2014. The analysis provides evidence that the likelihood of individual protest participation is positively associated with online news consumption. The study also shows that the magnitude of the effect varies depending upon the political context: surprisingly, despite supposedly unlimited control offline as well as online media, autocratic countries demonstrated higher effects of online news than transitional regimes, where the Internet media are relatively uninhibited.
    Keywords: Internet, new media, online news, protest, political regime
    JEL: Z
    Date: 2017

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