nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2019‒01‒28
twenty-one papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Do Sharing Economy Platforms Foster Trust in Others? Evidence from a Survey Experiment By Godefroy DangNguyen; Sylvain Dejean; Thierry Pénard
  2. Should the central bank issue e-money? By Kahn, Charles M.; Rivadeneyra, Francisco; Wong, Tsz-Nga
  3. Regulating virtual currencies By Hofert, Eduard
  4. What Are We Talking about When We Talk about Digital Protectionism? By Susan Aaronson
  5. Clustering patterns in efficiency and the coming-of-age of the cryptocurrency market By Higor Y. D. Sigaki; Matjaz Perc; Haroldo V. Ribeiro
  6. Transition from Copper to Fiber Broadband: The Role of Connection Speed and Switching Costs By Lukasz Grzybowski; Maude Hasbi; Julienne Liang
  7. How Persistent and Dependent are Pricing of Bitcoin to other Cryptocurrencies Before and After 2017/18 Crash? By Yaya, OlaOluwa S; Ogbonna, Ephraim A; Olubusoye, Olusanya E
  8. PROOF OF VALUE ALIENATION (PoVA) - a concept of a cryptocurrency issuance protocol By Tim Shuliar; Nikita Goldsmit
  9. The OECD Digital Services Trade Restrictiveness Index By Janos Ferencz
  10. On money, debt, trust and central banking By Claudio Borio
  11. Adoption of improved crop varieties by involving farmers in the e-wallet program in Nigeria By Joseph I. Uduji; Elda N. Okolo-Obasi
  12. Intellectual Property and Taxation in Digital Platforms By Juan Manuel Sanchez-Cartas
  13. Empirical forward price distribution from Bitcoin option prices By Nikolai Zaitsev
  14. Does Scientific Progress Affect Culture? A Digital Text Analysis By Michela Giorcelli; Nicola Lacetera; Astrid Marinoni
  15. Blockchain Governance and Regulation as an Enabler for Market Creation in Emerging Markets By Marina Niforos
  16. Robustness of Support Vector Machines in Algorithmic Trading on Cryptocurrency Market By Maryna Zenkova; Robert Ślepaczuk
  17. Diffusion and adoption of technological innovations in Mar del Plata cooperative sector: the invisibility of their work By Zanfrillo, Alicia Inés
  18. Estimating Consumer Inertia in Repeated Choices of Smartphones By Lukasz Grzybowski; Ambre Nicolle
  19. From Immigrants to Robots: The Changing Locus of Substitutes for Workers By George J. Borjas; Richard B. Freeman
  20. Money Is More Than Memory By Maria Bigoni; Gabriele Camera; Marco Casari
  21. The Long-Run Demand for M2 Reconsidered By Sophie Altermatt

  1. By: Godefroy DangNguyen (EA LEGO,IMT Atlantique, Gis M@rsouin); Sylvain Dejean (CEREGE, University of La Rochelle); Thierry Pénard (Univ Rennes, CNRS, CREM - UMR 6211, F-35000 Rennes, France)
    Abstract: The rise of digital platforms in which peers can share goods or services has drawn attention to the ability of these platforms to foster trust amongst their members. Combining experimental methods with an online survey of 2,000 representative Internet users in France, we investigate whether users of sharing economy platforms are more likely to cooperate in the context of a trust game. We focus our attention on the carsharing platform, Blablacar. Our main findings show that neither trust nor trustworthiness increase with the use of BlaBlaCar or other similar sharing platforms. Moreover, cooperation is not fostered if the trust game is played by two members of BlaBlaCar, suggesting that digital platforms do not create interpersonal trust that is transferable outside of these platforms.
    Keywords: Trust, Sharing economy, Platforms
    Date: 2018–12
  2. By: Kahn, Charles M. (University of Illinois at Urbana-Champaign); Rivadeneyra, Francisco (Bank of Canada); Wong, Tsz-Nga (Federal Reserve Bank of Richmond)
    Abstract: Should a central bank take over the provision of e-money, a circulable electronic liability? We discuss how e-money technology changes the tradeoff between public and private provision, and the tradeoff between e-money and a central bank's existing liabilities like bank notes and reserves. The tradeoffs depend on i) the technological setup of the e-money system (as a token or an account; centralized or decentralized); ii) the potential improvement in the implementation and transmission of monetary policy; iii) the risks to safety and privacy from cyber attacks; and iv) the uncertain impact on banks' efficiency and financial stability. The most compelling argument for central banks to issue e-money is to address competition problems in the banking sector.
    Keywords: central bank digital currencies; e-money; cryptocurrencies; token- and account- based payment payments
    JEL: E42 E51 E58
    Date: 2019–01–18
  3. By: Hofert, Eduard
    Abstract: Distributed ledger technology especially in the form of publicly coordinated validation networks such as Ethereum and Bitcoin with their own monetary circles provide for a revealing litmus test for current financial regulatory schemes. The paper highlights the interrelation between distributed coordination and the emission of virtual currency to make sense of the function of the new monetary phenomenon. It then argues for the regulation of financial services on the ground of the technology to ensure integrity standards. In this respect, it is useful to gear the development of a regulatory scheme towards the existing financial regulatory principles. However, future measures of the regulators must take the distributed nature of the platforms into account by relying on a "regulated self-regulation" of the community. Finally, the article focuses on the shortcomings of the current EU regulatory regimes, especially the regulation frameworks regarding financial services, payment services and electronic money.
    Date: 2019
  4. By: Susan Aaronson (George Washington University)
    Abstract: For almost a decade, executives, scholars, and trade diplomats have argued that filtering, censorship, localization requirements, and domestic regulations are distorting the cross-border information flows that underpin the internet. Herein I use process tracing to examine the state and implications of digital protectionism. I make five points: First, I note that digital protectionism differs from protectionism of goods and other services. Information is intangible, highly tradable, and some information is a public good. Secondly, I argue that it will not be easy to set international rules to limit digital protectionism without shared norms and definitions. Thirdly, the US, EU, and Canada have labeled other countries policies’ protectionist, yet their arguments and actions sometimes appear hypocritical. Fourth, I discuss the challenge of Chinese failure to follow key internet governance norms. China allegedly has used a wide range of cyber strategies, including distributed denial of service (DDoS) attacks (bombarding a web site with service requests) to censor information flows and impede online market access beyond its borders. WTO members have yet to discuss this issue and the threat it poses to trade norms and rules. Finally, I note that digital protectionism may be self-defeating. I then draw conclusions and make policy recommendations.
    Keywords: data, internet, e-commerce, digital trade, data flows, WTO, protectionism
    JEL: F1 F5
    Date: 2018
  5. By: Higor Y. D. Sigaki; Matjaz Perc; Haroldo V. Ribeiro
    Abstract: The efficient market hypothesis has far-reaching implications for financial trading and market stability. Whether or not cryptocurrencies are informationally efficient has therefore been the subject of intense recent investigation. Here, we use permutation entropy and statistical complexity over sliding time-windows of price log returns to quantify the dynamic efficiency of more than four hundred cryptocurrencies. We consider that a cryptocurrency is efficient within a time-window when these two complexity measures are statistically indistinguishable from their values obtained on randomly shuffled data. We find that 37% of the cryptocurrencies in our study stay efficient over 80% of the time, whereas 20% are informationally efficient in less than 20% of the time. Our results also show that the efficiency is not correlated with the market capitalization of the cryptocurrencies. A dynamic analysis of informational efficiency over time reveals clustering patterns in which different cryptocurrencies with similar temporal patterns form four clusters, and moreover, younger currencies in each group appear poised to follow the trend of their 'elders'. The cryptocurrency market thus already shows notable adherence to the efficient market hypothesis, although data also reveals that the coming-of-age of digital currencies is in this regard still very much underway.
    Date: 2019–01
  6. By: Lukasz Grzybowski; Maude Hasbi; Julienne Liang
    Abstract: We estimated a mixed logit model using data on the broadband technologies chosen by 94,388 subscribers of a single European broadband operator on a monthly basis between January and December 2014. We found that consumers have similar valuation of DSL connection speeds in the range between 1 and 8 Mbps. Moreover, in January 2014, the valuation of FttH connections with a speed of 100 Mbps was not much higher than of DSL connections with a speed of 1 to 8 Mbps, but it has increased quickly over time. The small initial difference in the valuation of DSL and FttH connections may be because consumers' basic Internet requirements such as browsing, emailing, reading news, shopping, and even watching videos online could be satisfied with a connection speed below 8 Mbps. We also found that consumers face significant switching costs when changing broadband tariff plans, which are substantially higher when switching from DSL to FttH technology. According to counterfactual simulations based on our model, switching costs between technologies are the main factor which slows down consumer transition from DSL to FttH.
    Keywords: FttH, DSL, connection speed, switching costs
    JEL: L43 L50 L96
    Date: 2018
  7. By: Yaya, OlaOluwa S; Ogbonna, Ephraim A; Olubusoye, Olusanya E
    Abstract: The present paper investigates persistence and dependence of Bitcoin on other popular alternative coins. We employ fractional integration approach in our analysis of persistence while a more recent fractional cointegration technique in VAR set-up, proposed by Johansen and co-authors is used to investigate dependency of the paired variables. Having segregated the series into periods before crash and those after the crash as determined by Bitcoin pricing, we obtain results of interests. Higher persistence of shocks is expected after the crash due to speculations in the mind of cryptocurrency traders, and more evidences of non-mean reversions, implying chances of further price fall in cryptocurrencies. Cointegration analysis between Bitcoin and alternative coin exists during both periods, with weak correlation observed mostly in the post-crash period. We hope the findings will serve as guide to investors in cryptocurrency.
    Keywords: Cointegration; Cryptocurrency; Fractional integration; Fractional cointegration; Vector autoregression
    JEL: C22
    Date: 2018–12–23
  8. By: Tim Shuliar; Nikita Goldsmit
    Abstract: In this paper, we will describe a concept of a cryptocurrency issuance protocol which supports digital currencies in a Proof-of-Work ( ) like manner. However, the methods assume alternative utilization of assets used for cryptocurrency creation (rather than purchasing electricity necessary for ).
    Date: 2019–01
  9. By: Janos Ferencz (OECD)
    Abstract: The rapid acceleration of digital transformation has had profound implications for services trade but the benefits of digitalisation risk being derailed by existing and emerging trade barriers. The OECD Digital Services Trade Restrictiveness Index (Digital STRI) is a new tool that identifies, catalogues, and quantifies cross-cutting barriers that affect services traded digitally. It consists of two components, the regulatory database and indices, which bring together comparable information from 44 countries. The Digital STRI shows a diverse and complex global regulatory environment affecting trade in digitally enabled services. Moreover, over the past years, the indices show an increasingly tightening regulatory environment highlighting that further international cooperation and dialogue is needed to maximise the benefits of digitalisation.
    Keywords: digital trade, Digital transformation, digitally enabled services, regulation, services trade restrictions
    JEL: F13 F14
    Date: 2019–01–23
  10. By: Claudio Borio
    Abstract: This essay examines in detail the properties of a well functioning monetary system - defined as money plus the mechanisms to execute payments - in both the short and long run, drawing on both theory and the lessons from history. It stresses the importance of trust and of the institutions needed to secure it. Ensuring price and financial stability is critical to nurturing and maintaining that trust. In the process, the essay addresses several related questions, such as the relationship between money and debt, the viability of cryptocurrencies as money, money neutrality, and the nexus between monetary and financial stability. While the present monetary system, with central banks and a prudential apparatus at its core, can and must be improved, it still provides the best basis to build on.
    Keywords: monetary system, money, debt, payments, trust, monetary stability, financial stability, central bank
    JEL: E00 E30 E40 E50 G21 N20
    Date: 2019–01
  11. By: Joseph I. Uduji (University of Nigeria, Nsukka, Nigeria); Elda N. Okolo-Obasi (University of Nigeria, Nsukka, Nigeria)
    Abstract: The amount of improved seed used in Nigeria is extremely low. Overall, only 5 to 10 percent of cultivated land is planted with improved seeds, and about 10 percent of rural farmers use improved varieties. The objective of this investigation was to identify determinants of adoption of improved seed by farmers not participating in and those participating in the federal government’s e-wallet program in Nigeria. We determined the impact of the e-wallet program on adoption of improved seed in rural areas. One thousand, two hundred (1200) rural farmers were sampled across six geopolitical zones of Nigeria. Results from the use of a bivariate probit model indicated that the e-wallet program continued to become increasingly popular among rural farmers; and that farmers’ literacy, ownership of a mobile phone, value output, mobile network coverage, power for charging phone batteries and contact with extension agents were the positive determinants of farmer participation in thee-wallet program. Cultural obstacles to married women, growers’ age, and increased distance to registration and input collection centers reduced farmers’ tendency to participate in the e-wallet program. The results also showed that rural farmers depended on the e-wallet program for increased use and adoption of improved seed in Nigeria, to boost food security in sub-Saharan Africa. The results suggested the need for an improved e-wallet model by lessening constraints mostly associated with rural information and communication infrastructure, and distance to the registration and input collection centers.
    Keywords: Agricultural transformation agenda; bivariate probit model
    JEL: J43 O40 O55 Q10
    Date: 2018–01
  12. By: Juan Manuel Sanchez-Cartas
    Abstract: I study the impact of competition and taxation on the openness and the intellectual property policies of two-sided digital platforms. I model a market in which two platforms compete for users and developers. First, I find that higher competition shortens the period of exclusivity granted to developers but does not influence the degree of openness of a platform. However, the higher the degree of differentiation in the developers market, the less open the platforms are. Second, I analyze two types of taxes, ad valorem and unit taxes. Ad-valorem taxes have no effect on the length of the exclusivity period. However, they increase the degree of openness of the platform when levied on users. Unit taxes instead limit the degree of openness and increase the period of exclusivity when levied on the developers market. Lastly, I find that multi-homing reduces the exclusivity period, but does not change the qualitative effects of taxation. My findings suggest that the new digital tax proposed by the European Commission, that should come into force in 2020, may reduce openness and innovation levels in the European Union.
    Keywords: Two-sided markets, Digital Platforms, Taxation, Intellectual Property, Openness
    JEL: H22 L13 L51 L86 O34
    Date: 2019
  13. By: Nikolai Zaitsev
    Abstract: Report presents analysis of empirical distribution of future returns of bitcoin (BTC) from BTUSD inverse option prices. Logistic pdf is chosen as underlying distribution to fit option prices. The result is satisfactory and suggests that these prices can be described with just three or even one parameter. Fitted Logistic pdf matches forward price movements upto a scaling factor. Nevertheless, this observation stands alone and does not allow stochastic description of underlying prices with logistic pdf in similar fashion as it is done within Black-Scholes modelling framework. Put-call parity relationship is derived connecting prices of vanilla inverse options and futures.
    Date: 2019–01
  14. By: Michela Giorcelli; Nicola Lacetera; Astrid Marinoni
    Abstract: We study the interplay between scientific progress and culture through text analysis on a corpus of about eight million books, with the use of techniques and algorithms from machine learning. We focus on a specific scientific breakthrough, the theory of evolution through natural selection by Charles Darwin, and examine the diffusion of certain key concepts that characterized this theory in the broader cultural discourse and social imaginary. We find that some concepts in Darwin’s theory, such as Evolution, Survival, Natural Selection and Competition diffused in the cultural discourse immediately after the publication of On the Origins of Species. Other concepts such as Selection and Adaptation were already present in the cultural dialogue. Moreover, we document semantic changes for most of these concepts over time. Our findings thus show a complex relation between two key factors of long-term economic growth – science and culture. Considering the evolution of these two factors jointly can offer new insights to the study of the determinants of economic development, and machine learning is a promising tool to explore these relationships.
    JEL: N00 O30 Z1
    Date: 2019–01
  15. By: Marina Niforos
    Keywords: Finance and Financial Sector Development - Capital Markets and Capital Flows Finance and Financial Sector Development - Financial Regulation & Supervision Finance and Financial Sector Development - Financial Structures Governance - Governance and the Financial Sector Information and Communication Technologies - Information Security & Privacy Law and Development - Financial Law
    Date: 2018–09
  16. By: Maryna Zenkova (Quantitative Finance Research Group, Faculty of Economic Sciences, University of Warsaw); Robert Ślepaczuk (Quantitative Finance Research Group, Faculty of Economic Sciences, University of Warsaw)
    Abstract: This study investigates the profitability of a algorithmic trading strategy based on training SVM model to identify cryptocurrencies with high or low predicted returns. A tail set is defined to be a group of coins whose volatility-adjusted returns are in the highest or lowest quantile. Each cryptocurrency is represented by a set of six technical features. SVM is trained on historical tail sets and tested on the current data. The classifier is chosen to be a nonlinear support vector machine. Portfolio is formed by ranking coins using SVM output. The highest ranked coins are used for long positions to be included in the portfolio for one reallocation period. The following metrics were used to estimate the portfolio profitability: %ARC (the annualized rate of change), %ASD (the annualized standard deviation of daily returns), MDD (the maximum drawdown coefficient), IR1, IR2 (the information ratio coefficients). The performance of the SVM portfolio is compared to the performance of the four benchmark strategies based on the values of the information ratio coefficient IR1 which quantifies the risk-weighted gain. The question on how sensitive the portfolio performance is to the parameters set in the SVM model is also addressed in this study.
    Keywords: machine learning, support vector machines, investment algorithm, algorithmic trading, strategy, optimization, cross-validation, overfitting, cryptocurrency market, technical analysis, meta parameters
    JEL: C4 C45 C61 C15 G14 G17
    Date: 2019
  17. By: Zanfrillo, Alicia Inés
    Abstract: The contagion of innovations originates in small groups of pioneers that influence a larger group known as imitators, developing a channel of great influence on the next ones interested in the incorporation of a product or service. In the emerging Argentine market the adoption of technologies is explained by the imitation effect rather than by a few precursors. The advantage of knowing the potential market for a new technology allows the definition of policies that facilitate its propagation in the target groups. The purpose of the work is to model the behavior of Mar del Plata cooperative sector in the access to internet resources in order to promote the dissemination of these technologies on the market potential. From the marketing perspective, a quantitative research of a descriptive type with techniques of secondary source analysis is undertaken to obtain, with the mathematical formulation of Bass (1968), the parameters of the speed of adoption of the presence of internet. Subsequently, an agent-based approach was used to simulate the incorporation into the Information Society considering: a) the dynamic nature of the potential market given the permeability to the life cycle of these entities and b) the presence of complementary products such as social media. The resulting adoption curve resembles the original one in a slow penetration of the market, constituting a challenge to promote its inclusion in the new economy.
    Keywords: Internet; Difusión de Innovaciones; Cooperativas;
    Date: 2018–07
  18. By: Lukasz Grzybowski; Ambre Nicolle
    Abstract: In this paper, we use a unique dataset on switching between mobile handsets in a sample of about 8,623 subscribers using tariffs without handset subsidies from a single mobile operator on a monthly basis between July 2011 and December 2014. We estimate a discrete choice model in which we account for disutility from switching to different operating systems and handset brands and for unobserved time-persistent preferences for operating systems and brands. Our estimation results indicate the presence of significant inertia in the choices of operating systems and brands. We find that it is harder for consumers to switch from iOS to Android and other operating systems than from Android and other operating systems to iOS. Moreover, we find that there is significant time-persistent heterogeneity in preferences for different operating systems and brands, which also leads to state-dependent choices. We use our model to simulate market shares in the absence of switching costs and conclude that the market shares of Android and smaller operating systems would increase at the expense of the market share of iOS.
    Keywords: smartphones, consumer inertia, switching costs, mixed logit, iOS, Android
    JEL: L13 L50 L96
    Date: 2018
  19. By: George J. Borjas; Richard B. Freeman
    Abstract: Increased use of robots has roused concern about how robots and other new technologies change the world of work. Using numbers of robots shipped to primarily manufacturing industries as a supply shock to an industry labor market, we estimate that an additional robot reduces employment and wages in an industry by roughly as much as an additional 2 to 3 workers and by 3 to 4 workers in particular groups, which far exceed estimated effects of an additional immigrant on employment and wages. While the growth of robots in the 1996-2016 period of our data was too modest to be a major determinant of wages and employment, the estimated coefficients suggest that continued exponential growth of robots could disrupt job markets in the foreseeable future and thus merit attention from labor analysts.
    JEL: J20 J61 O33
    Date: 2019–01
  20. By: Maria Bigoni (University of Bologna & IZA); Gabriele Camera (Chapman University & University of Bologna); Marco Casari (University of Bologna & IZA)
    Abstract: Impersonal exchange is the hallmark of an advanced society and money is one key institution that supports it. Economic theory regards money as a crude arrangement for monitoring counterparts’ past conduct. If so, then a public record of past actions—or memory—should supersede the function performed by money. This intriguing theoretical postulate remains untested. In an experiment, we show that the suggested functional equivalence between money and memory does not translate into an empirical equivalence: money removed the incentives to free ride, while memory did not. Monetary systems performed a richer set of functions than just revealing past behaviors.
    Keywords: Cooperation, intertemporal trade, experiments, institutions, social norms.
    JEL: C70 C90 D03 E40
    Date: 2018
  21. By: Sophie Altermatt
    Abstract: This paper reconsiders the long-run demand for M2 based on a newly con- structed dataset featuring 32 countries since the rst half of the 19th century. The evidence from cointegration tests suggests that a long-run equilibrium re- lationship for M2 demand is hardly present. Speci cally, only for ve countries (Finland, Korea, Mexico, Paraguay and Taiwan) cointegration tests produce strong evidence in favor of a stable long-run money demand. Evidence for Israel and Lebanon is weaker, but still points towards a stable long-run demand for M2. For all other countries evidence speaks against a stable money demand or it is mixed across money demand speci cations and/or type of cointegration test.
    Keywords: Money Demand, Velocity, Cointegration
    JEL: E4 E41
    Date: 2018–03

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