nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2019‒03‒18
twenty papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Central Bank Digital Currency and Financial Stability By Young Sik Kim; Ohik Kwon
  2. Central Bank digital currencies: features, options, pros and cons By Santiago Fernández de Lis; Olga Gouveia
  3. Rethinking Liability Rules for Online Hosting Platforms By Miriam Buiten; Alexandre de Streel; Martin Peitz
  4. Superstars in two-sided markets: exclusives or not? By Elias Carroni; Leonardo Madio; Shiva Shekhar
  5. Forecasting Volatility in Cryptocurrency Markets By Mawuli Segnon; Stelios Bekiros
  6. Advertising strategy in the presence of reviews: An empirical analysis By Hollenbeck, Brett; Moorthy, Sridhar; Proserpio, Davide
  7. The Effect of Interest Rate Caps on Bankruptcy: Synthetic Control Evidence from Recent Payday Lending Bans By Kabir Dasgupta; Brenden J. Mason
  8. Externalities in Knowledge Production: Evidence from a Randomized Field Experiment By Hinnosaar, Marit; Hinnosaar, Toomas; Kummer, Michael; Slivko, Olga
  9. Learning about digital trade: Privacy and e-commerce in CETA and TPP By Robert Wolfe
  10. When 1+1 is Greater than 2: Concurrence of Additional Digital and Established Business Models within Companies By Toutaoui, Jonas
  11. Crowdsourcing financial information to change spending behavior By Francesco D'Acunto; Alberto G. Rossi; Michael Weber
  12. Blockchains for Islamic finance: Obstacles & Challenges By Elasrag, Hussein
  13. Altcoin-Bitcoin Arbitrage By Zura Kakushadze; Willie Yu
  14. The impact of digital technologies on perceptions of proximity By Bastien Bernela; Marie Ferru; Alain Rallet
  15. Productivity is higher among some service firms when broadband becomes available, but not all By Stefanie Haller; Seán Lyons
  16. Hijabers on Instagram: Using Visual Social Media to Construct the Ideal Muslim Woman By Baulch, Emma; Pramiyanti, Alila
  17. The business model of a streaming platform By E. Carroni; D. Paolini
  18. Investments in big data analytics and firm performance: an empirical investigation of direct and mediating effects By Elisabetta Raguseo; Claudio Vitari
  19. Making Smart Meters Smarter the Smart Way By Quentin Coutellier; Greer Gosnell; Ralf Martin; Mirabelle Muûls; Goran Strbac; Mingyang Sun; Simon Tindermans
  20. Getting Smart About Phones: New Price Indexes and the Allocation of Spending Between Devices and Services Plans in Personal Consumption Expenditures By Ana Aizcorbe; David M. Byrne; Daniel E. Sichel

  1. By: Young Sik Kim (Department of Economics, Seoul National University); Ohik Kwon (Economic Research Institute, Bank of Korea)
    Abstract: We examine the implications of central bank digital currency (CBDC) for financial stability using a monetary general equilibrium model in which (i) banks provide liquidity in the form of fiat currency, and (ii) commercial bank deposits compete with the central bank deposits in CBDC account. CBDC is a national currency-denominated, interest-bearing and account-based claim on the central bank. People have access to CBDC via direct deposit at the central bank. Claims on specific agents cannot be traded across locations due to limited communication and hence in the event of relocation an agent needs to withdraw deposits in the form of universally verified paper currency. Claims on interest-bearing CBDC is not subject to limited communication problem in the sense that it is also universally verified across locations as an account-based legal tender. The introduction of deposits in CBDC account essentially decreases supply of private credit by commercial banks, which raises the nominal interest rate and hence lowers a commercial bank's reserve-deposit ratio. This has negative effects on financial stability by increasing the likelihood of bank panic in which commercial banks are short of cash reserves to pay out to depositors. However, once the central bank can lend all the deposits in CBDC account to commercial banks, an increase in the quantity of CBDC which does not require reserve holdings can enhance financial stability by essentially increasing supply of private credit and hence lowering nominal interest rate.
    Keywords: banking, central bank, digital currency, liquidity
    JEL: E31 E42 F33
    Date: 2019–02–08
  2. By: Santiago Fernández de Lis; Olga Gouveia
    Abstract: The emergence of cryptocurrencies is opening the way to Central Bank Digital Currencies (CBDCs). This paper highlights the pros and cons of issuing CBDCs under four different variants: from the more modest proposals where risk and reward are both relatively small, to the most ambitious ones where the ambitious aspiration of ending banking crises.
    Keywords: Working Paper , Central Banks , Financial regulation , Digital Regulation , Digital economy , Global
    Date: 2019–03
  3. By: Miriam Buiten; Alexandre de Streel; Martin Peitz
    Abstract: With the growing economic and societal importance of online platforms, the question of their liability for illegal content or products they host becomes more important. Based on an analysis of platforô€…µsô€ › incentives, we address the appropriate liability rule for hosting service providers and derive policy recommendations for an efficient liability regime in the European Union. Online hosting platforms may take monitoring efforts on their own initiative that are suboptimal due to the presence of externalities and asymmetric information problems, warranting some form of liability rules. However, for more fundamental reasons of free speech and preventing censorship, policy makers may want to be cautious in entrusting – and burdening – priô€‡€ate parties ô€‡ hiô€„ h suô€„ h aô€…¶ eô€‡†teô€…¶siô€‡€e ô€ špoliô€„ iô€…¶gô€ › role. Additioô€…¶allô€‡‡, higher monitoring requirements may disproportionally burden small entrants. As we argue, since several actors participate to the diffusion of illegal material online, the responsibility of a safe Internet should be shared among all these actors. Concrete regulatory improvements may encourage online hosting platforms to do their part in monitoring proactively and diligently, such as affirming a good Samaritan clause.
    Keywords: Online platforms, illegal content, e-commerce, liability rules
    Date: 2019–03
  4. By: Elias Carroni; Leonardo Madio; Shiva Shekhar
    Abstract: This article studies incentives for a premium provider (Superstar) to offer exclusive contracts to competing platforms mediating the interactions between consumers and firms. When platform competition is intense, more consumers subscribe to the platform hosting the Superstar exclusively. This mechanism is self-reinforcing as firms follow consumer decisions and (some) join exclusively the platform with the Superstar. Exclusivity always benefits firms and may benefit consumers. Moreover, when the Superstar is integrated with a platform, non-exclusivity becomes more likely than if the Superstar was independent. This analysis provides several implications for managers and policy makers operating in digital and traditional markets.
    Keywords: exclusive contracts, platforms, two-sided markets, ripple effect, content providers, market power
    JEL: L13 L22 L86
    Date: 2019
  5. By: Mawuli Segnon; Stelios Bekiros
    Abstract: In this paper, we revisit the stylized facts of cryptocurrency markets and propose various approaches for modeling the dynamics governing the mean and variance processes. We first provide the statistical properties of our proposed models and study in detail their forecasting performance and adequacy by means of point and density forecasts. We adopt two loss functions and the model confidence set (MSC) test to evaluate the predictive ability of the models and the likelihood ratio test to assess their adequacy. Our results confirm that cryptocurrency markets are characterized by regime shifting, long memory and multifractality. We find that the Markov switching multifractal (MSM) and FIGARCH models outperform other GARCH-type models in forecasting bitcoin returns volatility. Furthermore, combined forecasts improve upon forecasts from individual models.
    Keywords: Bitcoin, Multifractal processes, GARCH processes, Model confidence set, Likelihood ratio test
    JEL: C22 C53 C58
    Date: 2019–03
  6. By: Hollenbeck, Brett; Moorthy, Sridhar; Proserpio, Davide
    Abstract: We study the relationship between online reviews and advertising spending in the hotel industry. Combining a dataset of TripAdvisor reviews with other datasets describing these hotels’ advertising expenditures, we show, first, that online ratings have a causal demand-side effect on ad spending. Second, this effect is negative: hotels with higher ratings spend less on advertising than hotels with lower ratings. This suggests that hotels treat TripAdvisor ratings and advertising spending as substitutes, not complements. Third, the relationship is stronger for independent hotels than for chains, and stronger in less differentiated markets than in more differentiated markets. The former suggests that a strong brand name continues to provide some immunity to reviews and the latter that the advertising response is stronger when ratings are more likely to be pivotal. Finally, we show that the relationship between online ratings and advertising has strengthened over time, just as TripAdvisor has become more popular, implying that firms respond to online reviews if and only if consumers respond to them.
    Keywords: Online reviews, advertising, regression discontinuity
    JEL: L1 L15 L20 M31 M37
    Date: 2019–03–14
  7. By: Kabir Dasgupta (NZ Work Research Institute, Auckland University of Technology); Brenden J. Mason (North Central College, Naperville, IL, USA)
    Abstract: Citing consumer protection concerns, New Hampshire – along with three other states – recently banned payday lending by implementing an APR cap on small loans. New Hampshire presents a compelling quasi-experiment: its neighbors already had a payday loan ban inplace. Hence, New Hampshire consumers were completely shut out of the storefront payday loan market. We perform a synthetic control analysis for all four of the recently-banning states. Our results show that, on the aggregate, bankruptcies are largely unaffected by the bans. Our New Hampshire results are characterized by an initial rise in bankruptcies after the ban, followed by a fall. This is consistent with the notion that payday bans hurt credit-constrained consumers in the short-run, but could help them in the long-run. We also analyze survey data of payday borrowers and find that while bankruptcies are unaffected, consumers substitute toward paying their credit card bills late and using pawnshops.
    Keywords: interest rate cap, payday lending, credit rationing, bankruptcy, informal bankruptcy, synthetic control, ArCo
    JEL: G23 G28 D12 C13
    Date: 2019–02
  8. By: Hinnosaar, Marit; Hinnosaar, Toomas; Kummer, Michael; Slivko, Olga
    Abstract: Do contributions to online content platforms induce a feedback loop of ever more user-generated content or will they discourage future contributions? To assess this, we use a randomized field experiment which added content to some pages in Wikipedia while leaving similar pages unchanged. We find that adding content has a negligible impact on the subsequent long-run growth of content. Our results have implications for information seeding and incentivizing contributions, implying that additional content does not generate sizable externalities, neither by inspiring nor by discouraging future contributions.
    Keywords: knowledge accumulation; User-generated content; Wikipedia
    JEL: C93 L17 L86
    Date: 2019–03
  9. By: Robert Wolfe
    Abstract: It is a truth universally acknowledged that every ambitious 21st century trade agreement is in want of a chapter on electronic commerce. One of the most politically sensitive and technically challenging issues is personal privacy, including cross-border transfer of information by electronic means, use and location of computing facilities, and personal information protection. States are learning to solve the problem of state responsibility for something that does not respect their borders while still allowing 21st century commerce to develop. A comparison of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and the Trans-Pacific Partnership (TPP) allows us to see the evolution of the issues thought necessary for an e-commerce chapter, since both include Canada, and to see the differing priorities of the U.S. and the EU, since they are each signatory to one of the agreements, but not of the other. I conclude by seeking generalizations about why we see a mix of aspirational and obligatory provisions in free trade agreements. I suggest that the reasons are that governments are learning how to work with each other in a new domain, and learning about the trade implications of these issues.
    Keywords: digital trade, electronic commerce, trade agreements
    Date: 2018–05
  10. By: Toutaoui, Jonas
    Abstract: Many established companies currently face digitalization challenges. Part of their answer is often the creation of new digital business models based on new technologies, which do not necessarily replace the existing business model but act as additional source of economic value. Having two business models in parallel in the same company creates the opportunity of synergies between these business models. However, knowledge about the interaction between digital and non-digital business models remains scarce. This study, currently in progress, contributes to research by filling this gap and identifying synergies already taken by companies of various industries, leading to a better understanding of digital business models within established companies and their interaction with existing, traditional business models. For practitioners this study provides insights on how to benefit from parallel business models within a company and thus how to better face digitalization.
    Date: 2019–02–27
  11. By: Francesco D'Acunto; Alberto G. Rossi; Michael Weber
    Abstract: We document five effects of providing individuals with crowdsourced spending information about their peers (individuals with similar characteristics) through a FinTech app. First, users who spend more than their peers reduce their spending significantly, whereas users who spend less keep constant or increase their spending. Second, users’ distance from their peers’ spend-ing affects the reaction monotonically in both directions. Third, users’ reaction is asymmetric - spending cuts are three times as large as increases. Fourth, lower-income users react more than others. Fifth, discretionary spending drives the reaction in both directions and especially cash withdrawals, which are commonly used for incidental expenses and anonymous transactions. We argue Bayesian updating, peer pressure, or the fact that bad news looms more than (equally-sized) good news cannot alone explain all these facts.
    Keywords: FinTech, learning, beliefs and expectations, peer pressure, financial decision-making, saving, consumer finance
    JEL: D12 D14 D91 E22
    Date: 2019
  12. By: Elasrag, Hussein
    Abstract: This paper focuses on analyzing the innovative technology “Blockchain” and the potential of blockchain-based applications for Islamic finance. The main objectives were to define how blockchain can change the Islamic finance industry. The paper discussed the various interesting applications of blockchain in Islamic finance that can bring different benefits. The paper also shed light on the challenges facing Applying Blockchains for Islamic finance .
    Keywords: blockchain, Islamic finance,waqf,zakat,Smart Sukuk ,Takaful
    JEL: G2 I3 Z12
    Date: 2019–03–06
  13. By: Zura Kakushadze; Willie Yu
    Abstract: We give an algorithm and source code for a cryptoasset statistical arbitrage alpha based on a mean-reversion effect driven by the leading momentum factor in cryptoasset returns discussed in Using empirical data, we identify the cross-section of cryptoassets for which this altcoin-Bitcoin arbitrage alpha is significant and discuss it in the context of liquidity considerations as well as its implications for cryptoasset trading.
    Date: 2019–03
  14. By: Bastien Bernela (CRIEF - Centre de Recherche sur l'Intégration Economique et Financière - Université de Poitiers); Marie Ferru (CRIEF - Centre de Recherche sur l'Intégration Economique et Financière - Université de Poitiers); Alain Rallet (RITM - Réseaux Innovation Territoires et Mondialisation - UP11 - Université Paris-Sud - Paris 11)
    Date: 2019–03–01
  15. By: Stefanie Haller; Seán Lyons
    Abstract: Using internet services over broadband connections may help some firms become more productive, generating more output from a given amount of labour and capital equipment. However, there is mixed evidence internationally about how large this benefit has been in practice and which types of firms are most likely to improve their productivity by using these technologies. In this research we examine the effects of broadband availability on the productivity of service sector firms.
    Keywords: Broadband availability; Services sector; Productivity
    Date: 2019–01
  16. By: Baulch, Emma; Pramiyanti, Alila
    Abstract: This article studies uses of Instagram by members of Indonesia’s Hijabers’ Community. It shows how hijabers employ Instagram as a stage for performing middle-classness, but also for dakwah (“the call, invitation or challenge to Islam”), which they consider one of their primary tasks as Muslims. By enfolding the taking and sharing of images of Muslimah bodies on Instagram into this Quranic imperative, the hijabers shape an Islamic-themed bodily esthetic for middle class women, and at the same time present this bodily esthetic as a form of Islamic knowledge. The article extends work on influencer culture on Instagram, which has considered how and whether women exert control over their bodies in post-feminist performances of female entrepreneurship and consumer choice on social media. In it, we argue that examining the “enframement” of hijaberness on Instagram show it to be both a Muslim variant of post-feminist performances on social media, and a female variant of electronically-mediated Muslim preaching. That is, hijabers’ performances of veiled femininity structure and are structured by two distinct fields - a dynamic global digital culture and a changing field of Islamic communication – and point to a “composite habitus,” similar to that identified by Waltorp.
    Keywords: dakwah, hijabers, Instagram, Indonesia, post-feminism, microcelebrity
    JEL: D83
    Date: 2018–10
  17. By: E. Carroni; D. Paolini
    Abstract: A streaming platform obtains contents from artists and offers commercial spaces to advertisers. Users value contents' variety and quality of the service and are heterogeneously bothered by ads. Two solutions can be proposed to users. If they pay a positive price, they subscribe to a commercial-free service with an upgrade of quality (Premium). Otherwise, they have free access to service of a basic quality. We find that a wider audience gives incentives to the platform to increase both the advertising intensity and the quality upgrade in the Premium. As a consequence, some people move to the Premium. At the limit, the platform opts for a purely subscription-based business model as the audience reaches a certain level. The parsimonious model we propose is able to give a rationale to the emergence of different business models in the streaming market as well as to the (end of the) disputes between artists and the Spotify model
    Keywords: Media;Advertising;Multi-Sided Markets;Platform;Second-degree price discrimination
    Date: 2019
  18. By: Elisabetta Raguseo (Polito - Politecnico di Torino [Torino]); Claudio Vitari (IAE de Paris)
    Date: 2017–11–06
  19. By: Quentin Coutellier; Greer Gosnell; Ralf Martin; Mirabelle Muûls; Goran Strbac; Mingyang Sun; Simon Tindermans
    Abstract: We report first results from a large scale randomized control trial of different forms of energy consumption feedback facilitated by smart meters and smart phone feedback apps. Nearly 40,000 customers of a large energy retailer in the UK were exposed to either very basic feedback apps - i.e. simply giving consumers access to monthly energy consumption - or more advanced feedback involving peer group comparisons as well as dis-aggregation of total electricity consumption. We find that more advanced feedback can lead to an average consumption reduction of nearly 4% (Intent to Treat). Taking into account that a large number of customers never sign in to any feedback apps suggests that the reduction effect among customers that do sign in is up to 12%. The smart meter installation was implemented by different installation firms across our sample and we find the reduction effect only for one customers of one installer who displays higher capabilities along a number of metrics. This could suggest that achieving energy preservation objectives does not only depend on the technology involved but also on the capabilities and skills of firms installing those technologies. In the UK, smart meters are by default installed with In Home Displays (IHD) that provide real time feedback on energy use. Some of the customers in our sample did not receive an IHD and we explore if this had any impact on the consumption reduction effect described above. Customers with (and without) IHD comprise a self-selected sample so we have to be careful in drawing causal conclusions. However, we do not find any evidence that any energy reducing effect is contingent on IHDs.
    Keywords: behavioural intervention, household energy demand, randomised controlled trial, information
    JEL: D12 Q48 Q54
    Date: 2019–02
  20. By: Ana Aizcorbe; David M. Byrne; Daniel E. Sichel
    Abstract: This paper addresses two measurement issues for mobile phones. First, we develop a new mobile phone price index using hedonic quality-adjusted prices for smartphones and a matched-model index for feature phones. Our index falls at an average annual rate of 17 percent during 2010-2018, close to the rate of decline in the price index used in the GDP Accounts. Given relatively flat average prices over this period, our index points to substantial quality improvement. Second, we propose a methodology to disentangle purchases of phones and wireless services when they are bundled together as part of a long-term service contract. Getting the allocation right is especially important for real PCE because the price deflators for phones and wireless services exhibit very different trends. Our adjusted estimates suggest that real PCE spending currently captured in the category Cellular Phone Services increased 4 percentage points faster than is reflected in published data.
    JEL: E01 E21 E31 O33
    Date: 2019–03

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