nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2019‒06‒10
thirty papers chosen by

  1. Informal Sector and Mobile Financial Services in Developing Countries: Does Financial Innovation Matter? By Luc Jacolin; Massil Keneck; Alphonse Noah
  2. Trading and arbitrage in cryptocurrency markets By Makarov, Igor; Schoar, Antoinette
  3. Central Bank Digital Currency and Banking By Jonathan Chiu; Mohammad Davoodalhosseini; Janet Hua Jiang; Yu Zhu
  4. Energy Consumption of Bitcoin Mining By Küfeoğlu, S.; Özkuran, M.
  5. Adoption of e-commerce by individuals and digital divide: Evidence from Spain By Ángel Valarezo; Rafael López; Teodosio Pérez-Amaral
  6. Usages des téléphones portables en Afrique de l’Ouest: le point de vue d’Orange sur un partenariat de recherche public/privé By Marie-Victoire Comet; Kevin Mellet
  7. Formal Financial Inclusion in Cambodia: What are the Key Barriers and Determinants? By SAM, Vichet
  8. Do sterilized foreign exchange interventions create money? By Alexey Ponomarenko
  9. Monetary Stabilization in Cryptocurrencies - Design Approaches and Open Questions By Ingolf G. A. Pernice; Sebastian Henningsen; Roman Proskalovich; Martin Florian; Hermann Elendner; Bj\"orn Scheuermann
  10. Media See-saws: Winners and Losers in Platform Markets By Simon P. Anderson; Martin Peitz
  11. Aiming for the Goal: Contribution Dynamics of Crowdfunding By Joyee Deb; Aniko Oery; Kevin R. Williams
  12. The new media economics of video-on-demand markets: Lessons for competition policy (updated version) By Budzinski, Oliver; Lindstädt-Dreusicke, Nadine
  13. Information, Mobile Communication, and Referral Effects By Panle Jia Barwick; Yanyan Liu; Eleonora Patacchini; Qi Wu
  14. Money and the Measurement of Total Factor Productivity By Diewert, Erwin; Fox, Kevin J.
  15. On the Equivalence of Private and Public Money By Markus K. Brunnermeier; Dirk Niepelt
  16. Security Analysis of Machine Learning Systems for the Financial Sector By Shiori Inoue; Masashi Une
  17. The Role of Information Technology to Enhance Property Tax Revenue in Kenya, Tanzania and Zambia By McCluskey, William; Franzsen, Riël; Kabinga, Mundia; Kasese, Chabala
  18. Competition between offline and online retailers with heterogeneous customers By Stefano Colombo; Noriaki Matsushima
  19. Escaping the comfort zone: A three-level perspective on filtering effects and counter-measures By Schneegans, Tim
  20. Common Risk Factors in Cryptocurrency By Yukun Liu; Aleh Tsyvinski; Xi Wu
  21. Study of the readiness of managers of the civil service to work in a digital society By Sinyagin, Yuriy (Синягин, Юрий); Sinyagina, Natalia (Синягина, Наталья); Markaryan, Violetta (Маркарян, Виолетта); Barkova, Yulia (Баркова, Юлия)
  22. Should Central Banks Issue Digital Currency? By Keister, Todd; Sanches, Daniel R.
  23. An open banking platform for Germany: A future-oriented alternative to a merger of Deutsche Bank/Commerzbank By Brühl, Volker; Krahnen, Jan Pieter
  24. Failure to Contribute: An Estimate of the Consequences of Non- and Underpayment of Self-Employment Taxes by Independent Contractors and On-Demand Workers on Social Security By Caroline Bruckner; Thomas L. Hungerford
  25. E-learning as a marketing tool for Tour Operators. The ‘Go Academy’ case study By Temperini, Valerio; Gregori, Gian Luca; Pizzichini, Lucia
  26. Terrorism and social media: global evidence By Simplice A. Asongu; Stella-Maris I. Orim; Rexon T. Nting
  27. Blockchain Disables Real-World Governance By Hitoshi Matsushima
  28. OK Computer: The Creation and Integration of AI in Europe By Bernardo S. Buarque; Ronald B. Davies; Dieter F. Kogler; Ryan M. Hynes
  29. Reducing Informality Using Two-Sided Incentives: Theory and Experiment By Francisco B. Galarza; Fernando Requejo
  30. It's the Phone, Stupid: Mobiles and Murder By Lena Edlund; Cecilia Machado

  1. By: Luc Jacolin; Massil Keneck; Alphonse Noah
    Abstract: This paper investigates the impact of mobile financial services - MFS (mobile money, and mobile credit and savings) on the informal sector. Using both parametric and non-parametric methods on panel data from 101 emerging and developing countries over the period 2000-15, we find that MFS negatively affect the size of the informal sector. According to estimates derived from propensity score matching, MFS adoption decreases the informal sector size in a range of 2.4 – 4.3 percentage points of GDP. These formalization effects may stem from different possible transmission channels: improvement in credit access, increase in the productivity/profitability of informal firms attenuating subsistence constraints typical of entrepreneurship in the informal sector, as well as possible induced growth of firms already in the formal sector. The robustness of these results is supported by the use of an alternative estimation approach (instrumental variables). These findings lay the groundwork for the scarce literature on the macroeconomic impact of mobile financial services, a major dimension of the growing drive towards economic digitalization transiting through industry-level MW.
    Keywords: Mobile financial services, Mobile money, Financial innovation, Digitalization, Informal sector, Developing countries.
    JEL: C26 E26 O33 G29 L96
    Date: 2019
  2. By: Makarov, Igor; Schoar, Antoinette
    Abstract: Cryptocurrency markets exhibit periods of large, recurrent arbitrage opportunities across exchanges. These price deviations are much larger across than within countries, and smaller between cryptocurrencies, highlighting the importance of capital controls for the movement of arbitrage capital. Price deviations across countries co-move and open up in times of large bitcoin appreciation. Countries with higher bitcoin premia over the US bitcoin price see widening arbitrage deviations when bitcoin appreciates. Finally, we decompose signed volume on each exchange into a common and an id- iosyncratic component. The common component explains 80% of bitcoin returns. The idiosyncratic components help explain arbitrage spreads between exchanges.
    Keywords: cryptocurrencies; bitcoin; arbitrage; price impact; capital controls
    JEL: F3 G3
    Date: 2019
  3. By: Jonathan Chiu; Mohammad Davoodalhosseini; Janet Hua Jiang; Yu Zhu
    Abstract: Many central banks are considering whether to issue a new form of electronic money that would be accessible to the public. This new form is usually called a central bank digital currency (CBDC). Issuing a CBDC would have implications on the financial system and more broadly on the wider economy. The effects of a CBDC on the banking sector, output and welfare depend crucially on the level of competition in the market for bank deposits. We show that when banks have no market power, issuing a deposit-like CBDC (that people can use like a debit card in transactions) would crowd out private banking. It would shift deposits away from the banking system, reducing bank lending. However, in a more realistic scenario, when banks have market power in the deposit market, issuing a deposit-like CBDC with a proper interest rate would encourage banks to pay higher interest or offer better services to keep their customers. They can do so because they earn a positive profit. As a result, banks would attract more deposits and extend more loans. In this case, issuing a CBDC would not necessarily crowd out private banking. In fact, the CBDC would serve as an outside option for households, thus limiting banks’ market power, and improve the efficiency of bank intermediation. We show quantitatively that the effects of a CBDC on lending, deposits, output and welfare can be sizable. We also analyze how different designs of a CBDC affect our results, including whether the CBDC is deposit-like or cash-like and whether the CBDC can be used to satisfy banks’ reserve requirements.
    Keywords: Digital Currencies and Fintech; Market structure and pricing; Monetary Policy; Monetary policy framework
    JEL: E50 E58
    Date: 2019–05
  4. By: Küfeoğlu, S.; Özkuran, M.
    Abstract: After its introduction in 2008, increasing Bitcoin prices and a booming number of other cryptocurrencies lead to a growing discussion of how much energy is consumed during the production of these currencies. Being the most expensive and the most popular cryptocurrency, both the business world and the research community have started to question the energy intensity of bitcoin mining. This paper only focuses on computational power demand during the proof-of-work process rather than estimating the whole energy intensity of mining. We make use of 160 GB of bitcoin blockchain data to estimate the energy consumption and power demand of bitcoin mining. We considered the performance of 269 different hardware models (CPU, GPU, FPGA, and ASIC). For estimations, we defined two metrics, namely; minimum consumption and maximum consumption. The targeted time span for the analysis was from 3 January 2009 to 5 June 2018. We show that the historical peak of power consumption of bitcoin mining took place during the bi-weekly period commencing on 18 December 2017 with a demand of between 1.3 and 14.8 GW. This maximum demand figure was between the installed capacities of Finland (~16 GW) and Denmark (~14 GW). We also show that, during June 2018, energy consumption of bitcoin mining from difficulty recalculation was between 15.47 and 50.24 TWh per year.
    Keywords: bitcoin, mining, blockchain, energy, consumption
    JEL: Q47
    Date: 2019–05–24
  5. By: Ángel Valarezo (Instituto Complutense de Análisis Económico (ICAE), Universidad Complutense de Madrid (UCM).); Rafael López (Instituto Complutense de Análisis Económico (ICAE), Universidad Complutense de Madrid (UCM).); Teodosio Pérez-Amaral (Instituto Complutense de Análisis Económico (ICAE), Universidad Complutense de Madrid (UCM).)
    Abstract: E-commerce penetration rates are distant among those groups of individuals with the lowest and the highest levels of online shopping adoption. This is an indicator of digital divide, having negative effects in terms of untapped opportunities for people, companies and the whole economy. Key socioeconomic and demographic determinants of adoption of ecommerce are explored, analyzing a dataset of 174,776 observations for the period 2008-2017 in Spain. The empirical analysis is based on a standard neoclassical utility maximization framework. Linear probability model, logistic regression, and Heckman’s sample selection correction model have been used. The results suggest that e-commerce adoption is positively related with being male, having higher levels of education, income and digital skills, being Spanish, and being employed; while being female, older and belonging to a household of two or more members have negative effects. An interaction between digital skills and age has been introduced in the model, where high digital skills seem to have a positive influence, partly counteracting the lower odds for some age groups. Policy recommendations related to demand and supply measures are suggested to foster the adoption of e-commerce.
    Keywords: E-commerce; Digital divide; Linear probability model; Logistic regression; Heckman’s sample selection correction; Polychoric correlation; Digital skills; Time and regional dummies; Pool data; Utility maximization framework.
    JEL: C25 D11 O33
    Date: 2019–03
  6. By: Marie-Victoire Comet; Kevin Mellet (LISIS - Laboratoire Interdisciplinaire Sciences, Innovations, Sociétés - INRA - Institut National de la Recherche Agronomique - UPEM - Université Paris-Est Marne-la-Vallée - ESIEE Paris - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Un partenariat entre le département de la recherche d'Orange et le LAM est en cours depuis 2016 autour des questions concernant les usages professionnels du téléphone mobile dans l'économie informelle ouest-africaine. Marie-Victoire Comet et Kevin Mellet évoquent les enjeux de ce partenariat pour Orange et donnent leur point de vue sur les spécificités d'un tel marché, notamment au regard du mobile money.
    Keywords: Sénégal,téléphonie,partenariat public-privé,internet,TIC
    Date: 2019–05–06
  7. By: SAM, Vichet
    Abstract: This article investigates the barriers to formal financial inclusion in Cambodia, focusing on saving and credit strands. We propose the multinomial logit model, allowing to distinguish the outcome variable into three categories: Formal inclusion, Informal inclusion and Financial exclusion. We apply this model to the FinScope survey data conducted in late 2015, which represents the adult population in Cambodia. Results suggest that the trust to financial institutions, the financial literacy, the distance to banks or MFI, the lack of documentation and the service costs are the main obstacles, but these barriers affect the probability of using formal financial services differently according to the types of financial services (saving or credit). Gender, marital status, education, income, access to media and information, the use of mobile phone with the access to the Internet and the household size are also found to be the key determinants.
    Keywords: Determinants and Barriers to financial inclusion, Developing country, Multinomial logit model.
    JEL: G21 G28
    Date: 2019–05–18
  8. By: Alexey Ponomarenko (Bank of Russia, Russian Federation)
    Abstract: When a central bank accumulates foreign reserves, there are two possible ways of balance of payments adjustment: (1) decreasing commercial banks’ net foreign assets and (2) decreasing the non-banking sector’s net foreign assets and/or increasing the current account surplus. In the latter case, money is created. It does not matter whether the central bank sterilizes the bank reserves that it supplied to the money market and prevents the interest rate change – money will be created anyway (although sterilization may prevent further money creation through credit extension). Our empirical analysis shows that for emerging markets the type (2) adjustment is more common than type (1). Therefore, the accumulation of foreign reserves is likely to create money even when sterilized (i.e. it does not lead to lower money market interest rates).
    Keywords: Money supply, credit, foreign exchange interventions, foreign exchange reserves, emerging markets.
    JEL: E51 E58 F31 G21
    Date: 2019–05
  9. By: Ingolf G. A. Pernice; Sebastian Henningsen; Roman Proskalovich; Martin Florian; Hermann Elendner; Bj\"orn Scheuermann
    Abstract: The price volatility of cryptocurrencies is often cited as a major hindrance to their wide-scale adoption. Consequently, during the last two years, multiple so called stablecoins have surfaced---cryptocurrencies focused on maintaining stable exchange rates. In this paper, we systematically explore and analyze the stablecoin landscape. Based on a survey of 24 specific stablecoin projects, we go beyond individual coins for extracting general concepts and approaches. We combine our findings with learnings from classical monetary policy, resulting in a comprehensive taxonomy of cryptocurrency stabilization. We use our taxonomy to highlight the current state of development from different perspectives and show blank spots. For instance, while over 91% of projects promote 1-to-1 stabilization targets to external assets, monetary policy literature suggests that the smoothing of short term volatility is often a more sustainable alternative. Our taxonomy bridges computer science and economics, fostering the transfer of expertise. For example, we find that 38% of the reviewed projects use a combination of exchange rate targeting and specific stabilization techniques that can render them vulnerable to speculative economic attacks - an avoidable design flaw.
    Date: 2019–05
  10. By: Simon P. Anderson; Martin Peitz
    Abstract: We customize the aggregative game approach to oligopoly to study media platforms which may differ by popularity. Advertiser, platform, and consumer surplus are tied together by a simple summary statistic. When media are ad-financed and ads are a nuisance to consumers we establish see-saws between consumers and advertisers. Entry increases consumer surplus, but decreases advertiser surplus if industry platform profits decrease with entry. Merger decreases consumer surplus, but advertiser surplus tends to increase. By contrast, when platforms use two-sided pricing or consumers like advertising, advertiser and consumer interests are often aligned.
    Keywords: media economics, mergers, entry, advertising, aggregative games
    JEL: D43 L13
    Date: 2019–05
  11. By: Joyee Deb; Aniko Oery; Kevin R. Williams
    Abstract: We study reward-based crowdfunding campaigns, a new class of dynamic contribution games where consumption is exclusive. Two types of backers participate: buyers want to consume the product while donors just want the campaign to succeed. The key tension is one of coordination between buyers, instead of free-riding. Donors can alleviate this coordination risk. We analyze a dynamic model of crowdfunding and demonstrate that its predictions are consistent with high-frequency data collected from Kickstarter. We compare the Kickstarter mechanism to alternative platform designs and evaluate the value of dynamically arriving information. We extend the model to incorporate social learning about quality.
    JEL: D21 D22 D7 D8
    Date: 2019–05
  12. By: Budzinski, Oliver; Lindstädt-Dreusicke, Nadine
    Abstract: The markets for audiovisual content are subject to dynamic change. Where once "traditional" (free-to-air, cable, satellite) television was dominating, i.e. linear audiovisual media services, markets display nowadays strong growth of different types of video-on-demand (VoD), i.e. nonlinear audiovisual media services, including both Paid-for VoD like Amazon Prime and Netflix and Advertised-financed VoD like YouTube. Competition policy decisions in such dynamic markets are always particularly challenging. The German competition authority was presented such a challenge when, at the beginning of the 2010s, German television providers sought to enter online VoD markets with the help of cooperative platforms. We review the antitrust concerns that were raised back then in an ex post analysis. In doing so, we first discuss the dynamic development of the German VoD markets during the last decade. In the second part of this paper, we derive four aspects, in which the previous antitrust analysis cannot be upheld from today's perspective. First, relevant implications of modern platform economics were neglected. Second, some inconsistencies in the assessment of the two projects appear to be inappropriate. Third, the emerging competitive pressure of international VoD providers was strongly underestimated. Fourth, the question of market power in online advertising markets looks very different at the end of the decade.
    Keywords: video-on-demand,media economics,two-sided markets,competition,platform economics,commercial television,public service broadcasters,antitrust policy,YouTube,Amazon,Netflix
    JEL: L40 L82 K21 L13 D40
    Date: 2019
  13. By: Panle Jia Barwick; Yanyan Liu; Eleonora Patacchini; Qi Wu
    Abstract: Information is a crucial ingredient in economic decision making. Yet measuring the extent of information exchange among individuals and its effect on economic outcomes is a difficult task. We use the universe of de-identified cellphone usage records from more than one million users in a Chinese city over twelve months to quantify information exchange among individuals and examine the role of referrals – human carriers of information – in urban labor markets. We present the first evidence that information flow (measured by call volume) correlates strongly with worker flows, a pattern that persists at different levels of geographic aggregation. Condition on information flow, socioeconomic diversity in information sources (social contacts), especially that associated with the working population, is crucial and helps to predict worker flows. We supplement our phone records with auxiliary data sets on residential housing prices, job postings, and firm attributes from administrative data. Information passed on through referrals is valuable: referred jobs are associated with higher monetary gains, a higher likelihood to transition from part-time to full-time, reduced commuting time, and a higher probability of entering desirable jobs. Referral information is more valuable for young workers, people switching jobs from suburbs to the inner city, and those changing their industrial sector. Firms receiving referrals are more likely to have successful recruits and experience faster growth.
    JEL: J60 R23
    Date: 2019–05
  14. By: Diewert, Erwin; Fox, Kevin J.
    Abstract: Firms have greatly increased their cash holdings since the mid-1990s. These holdings have an opportunity cost; i.e., allocating firm financial capital into monetary deposits means that investment in real assets is reduced. Traditional measures of Total Factor Productivity (TFP) do not take into account these holdings of monetary assets. Given the recent large increases in these holdings in the U.S. and other advanced economies, it is expected that adding these monetary assets to the list of traditional sources of capital services will reduce the TFP of the business sector. We measure this effect for the U.S. corporate and non-corporate business sectors.
    Keywords: Productivity, money, national accounts, capital services Here.
    JEL: D24 E01 E41
    Date: 2019–05–31
  15. By: Markus K. Brunnermeier; Dirk Niepelt
    Abstract: We develop a generic model of money and liquidity that identifies sources of liquidity bubbles and seignorage rents. We provide sufficient conditions under which a swap of monies leaves the equilibrium allocation and price system unchanged. We apply the equivalence result to the "Chicago Plan,'' cryptocurrencies, the Indian de-monetization experiment, and Central Bank Digital Currency (CBDC). In particular, we show why CBDC need not undermine financial stability.
    JEL: E40 E41 E42 E44 E51 E52 E58 G21
    Date: 2019–05
  16. By: Shiori Inoue (Institute for Monetary and Economic Studies, Bank of Japan (E-mail:; Masashi Une (Director, Institute for Monetary and Economic Studies, Bank of Japan (E-mail:
    Abstract: The use of artificial intelligence, particularly machine learning (ML), is being extensively discussed in the financial sector. ML systems, however, tend to have specific vulnerabilities as well as those common to all information technology systems. To effectively deploy secure ML systems, it is critical to consider in advance how to address potential attacks targeting the vulnerabilities. In this paper, we classify ML systems into 12 types on the basis of the relationships among entities involved in the system and discuss the vulnerabilities and threats, as well as the corresponding countermeasures for each type. We then focus on typical use cases of ML systems in the financial sector, and discuss possible attacks and security measures.
    Keywords: Artificial Intelligence, Machine Learning System, Security, Threat, Vulnerability
    JEL: L86 L96 Z00
    Date: 2019–05
  17. By: McCluskey, William; Franzsen, Riël; Kabinga, Mundia; Kasese, Chabala
    Abstract: Public finance theory suggests that property tax is an ideal local tax. But it’s also a ‘data-hungry’ tax, making it difficult and costly to administer properly– especially at the local government level where capacity, skills and resources are often lacking. Given its high data demands, property tax administration lends itself to the application of modern information and communication technology (ICT) systems. Over the last 40 to 50 years, however, studies have shown that weak administration is the core reason for poor revenue performance, particularly issues of data compilation and management, lack of transparency, poor billing and collection practices and weak enforcement. Summary of Working Paper 88 by William McCluskey, Riël Franzsen, Mundia Kabinga and Chabala Kasese
    Keywords: Economic Development, Finance, Governance,
    Date: 2019
  18. By: Stefano Colombo; Noriaki Matsushima
    Abstract: We consider the spatial competition between two traditional physical (or offline) retailers and an Internet (or online) retailer where the efficiency of the latter differs from that of the former. We assume consumers are heterogeneous across two dimensions: (i) the costs of traveling to either of the offline retailers and (ii) the costs of purchasing from the online retailer. Both dimensions depend on the spatial location of consumers and are independent of each other. We show that the online retailer maximizes its profit at an intermediate level of the consumer disutility of online purchase when its efficiency is low.
    Date: 2019–05
  19. By: Schneegans, Tim
    Abstract: Together with the growing connectedness in the progress of globalization, researchers warn about the rise of so-called "filter bubbles" and "echo-chambers" that segregate citizens into comfort zones of self-confirming information and opinions. Regarding the Brexit referendum in 2016, DiFranzo and Gloria-Garcia (2017) blamed social media (e.g. Facebook) for trapping their users in an environment of self-confirming opinions that keeps them away from the political discourse. Besides technological filters, Geschke, Lorenz, and Holtz (2018) regard the mechanisms of filter bubbles on three levels, including technological recommender algorithms, homogeneous social networks, and individual biases. In this essay, I will follow this framework and describe certain filtering effects and deduce contraindications on all three levels. Amongst others, the concepts of social self-categorization (Tajfel, 1974), homogeneous networks (e.g. Bakshy et al., 2015), and self-confirmation biases (see the review from Garrett, 2009) might help un-derstanding filter bubbles. In order to promote public information exchange, we should not only modify filter algorithms but also become aware of our social comfort zone and our cognitive ability to select self-confirming information. Segregated groups must re-define their social identity and enlarge its definition to connect to seems-like-alien people (Pettigrew, 1998; Tajfel, 1974). This way we can promote the intrinsic human drive for curiosity as a counterweight against segregation.
    Keywords: echo chamber,filter bubble,digital citizenship,political psychology
    Date: 2019
  20. By: Yukun Liu; Aleh Tsyvinski; Xi Wu
    Abstract: We find that three factors – cryptocurrency market, size, and momentum – capture the cross-sectional expected cryptocurrency returns. We consider a comprehensive list of price- and market-related factors in the stock market, and construct their cryptocurrency counterparts. Nine cryptocurrency factors form successful long-short strategies that generate sizable and statistically significant excess returns. We show that all of these strategies are accounted for by the cryptocurrency three-factor model.
    JEL: G12
    Date: 2019–05
  21. By: Sinyagin, Yuriy (Синягин, Юрий) (The Russian Presidential Academy of National Economy and Public Administration); Sinyagina, Natalia (Синягина, Наталья) (The Russian Presidential Academy of National Economy and Public Administration); Markaryan, Violetta (Маркарян, Виолетта) (The Russian Presidential Academy of National Economy and Public Administration); Barkova, Yulia (Баркова, Юлия) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The paper analyzes the challenges associated with the development of artificial intelligence and digitalization of management, based on the results of an empirical study among more than a thousand managers, a characteristic of a leader who is able to effectively manage in new conditions is composed. The paper characterizes a 4-factor model of the integrated readiness of civil service managers to work using artificial intelligence systems in a digital society. Expectations and ideas about artificial intelligence among Russian leaders at various levels are identified. The individual psychological and personal-professional qualities that influence the readiness of the heads of the civil service to work in a digital society have been studied. Also the paper analyzes the possible threats associated with the emergence and development of artificial intelligence systems.
    Date: 2019–05
  22. By: Keister, Todd (Rutgers University); Sanches, Daniel R. (Federal Reserve Bank of Philadelphia)
    Abstract: We study how the introduction of a central bank-issued digital currency affects interest rates, the level of economic activity, and welfare in an environment where both central bank money and private bank deposits are used in exchange. Banks in our model are financially constrained, and the liquidity premium on bank deposits affects the level of aggregate investment. We study the optimal design of a digital currency in this setting, including whether it should pay interest and how widely it should circulate. We highlight an important policy tradeoff: while a digital currency tends to promote efficiency in exchange, it can also crowd out bank deposits, raise banksfunding costs, and decrease investment. Despite these effects, introducing a central bank digital currency often raises welfare.
    Keywords: Monetary policy; liquidity premium; collateral constraint; aggregate investment; cryptocurrency
    JEL: E32 E42 E52 G28
    Date: 2019–06–03
  23. By: Brühl, Volker; Krahnen, Jan Pieter
    Abstract: In this exploratory article, we consider the future of Deutsche Bank and Commerzbank and develop a new approach to the topic: instead of a merger of DB and CB we propose to consider a partial merger of the IT and related back office functions in order to create the basis for an Open Banking platform in Germany. Such a platform would act as a cross-institutional infrastructure company in which the participating banks develop a common data and IT platform (while respecting the data protection regulations). Significant parts of the transaction processes would be pooled by the institutions and executed by the Open Banking platform. Moreover, the institutions remain legally independent and compete with each other at the level of products and services that are developed and produced using just this common data and IT platform - "national champions" would not be created. But such an "Open Banking Platform" could become even the nucleus of a European Banking platform that could be competitive with existing global data platforms from the USA and China which are already offering financial services and are likely to expand their offerings in the foreseeable future. The proposed model of an open data platform for banks prevents the emergence of national champions and supports the main goal of the banking union: creation of a financial system, in which single banks can be resolved without provoking a systemic crisis and forcing taxpayers to finance bailouts.
    Keywords: Open Banking Platform Germany,Banking Union,Merger,Deutsche Bank,Commerzbank
    Date: 2019
  24. By: Caroline Bruckner; Thomas L. Hungerford
    Abstract: While existing academic and government research has focused on the size, growth trajectory, and labor and tax law implications of independent contractors, freelancers, and workers selling goods and services online and through app-based platforms (the “on-demand” economy), less work has been devoted to quantifying the Social Security implications for the on-demand economy and its workers. Although it is known that self-employed workers have tax compliance and reporting issues, the existing reporting rules applicable to most workers earning income in the on-demand economy substantially increase the likelihood that these taxpayers are failing to contribute to Social Security and Medicare through payment of the self-employment tax (SE tax). As such, this paper sheds light on the Social Security implications of current federal tax rules for independent contractors generally and, in particular, workers earning income through occupations occurring in the on-demand economy by estimating the population and earnings of these workers using the U.S. Census Bureau’s redesigned Survey of Income and Program Participation (SIPP). By analyzing 2014 SIPP data, we identify a population of self-employed, non-employer respondents working outside of a traditional employment relationship (“independent contractors”), as well as individuals working in occupations in the on-demand economy (“on-demand workers”). SIPP data have the potential to capture workers who earn income using on-demand platforms to connect with customers and process payments (“on-platform work”), as well as workers who earn income in occupations occurring in the on-demand economy who do not use on-demand platforms (“off-platform work”). Additionally, with SIPP data, we are able to estimate the income that independent contractors and on-demand workers earned in these employment relationships in 2014. Using Internal Revenue Service (IRS) data on the tax gap, U.S. Treasury Department audit data on underpayment of the SE tax, and survey data on tax compliance by on-demand economy workers and the self-employed, we are able to create an estimate of how much SE tax should have been paid on this income but likely was not. To provide context for our findings, we applied the methodology we developed to estimate the likely underpayment of the SE tax to data published in 2018 by the U.S. Bureau of Labor Statistics on the number of independent contractors and on-platform workers in 2017. In addition, using SIPP, we were able to provide supplemental demographic data on independent contractors and the on-demand platform workforce.
    Date: 2019–01
  25. By: Temperini, Valerio; Gregori, Gian Luca; Pizzichini, Lucia
    Abstract: Professional training has become increasingly more important as the tourism industry grows and evolves. It plays a particularly vital role in supporting business competitiveness in the traditional distribution system. This has encouraged a growing focus on e-learning and on the interesting advantages that it opens up in training activities. However, it has been given limited attention as a useful tool for marketing purposes. This paper aims to analyze the use of e-learning in the marketing perspective, with specific reference to the relationship between tour operators and travel agents, using the case study of the e-learning platform, Go Academy.
    Keywords: marketing; e-learning; tour operator; travel agents; relationship
    JEL: I25 L83 M31
    Date: 2019–04–15
  26. By: Simplice A. Asongu (Yaoundé/Cameroon); Stella-Maris I. Orim (Coventry University, UK); Rexon T. Nting (University of Wales, London, UK)
    Abstract: The study assesses the relationship between terrorism and social media from a cross section of 148 countries with data for the year 2012. The empirical evidence is based on Ordinary Least Squares, Negative Binomial and Quantile regressions. The main finding is that there is a positive relationship between social media in terms of Facebook penetration and terrorism. The positive relationship is driven by below-median quantiles of terrorism. In other words, countries in which existing levels of terrorism are low are more significantly associated with a positive Facebook-terrorism nexus. The established positive relationship is confirmed from other externalities of terrorism: terrorism fatalities, terrorism incidents, terrorism injuries and terrorism-related property damages. The terrorism externalities are constituents of the composite dependent variable.
    Keywords: Social Media; Terrorism
    JEL: D83 O30 D74
    Date: 2019–01
  27. By: Hitoshi Matsushima (University of Tokyo)
    Abstract: This study indicates that the improper uses of a public blockchain disable real-world governance in organizations and marketplaces. By using any basic application of smart contracts, such as escrow transactions, along with a revelation mechanism outside the blockchain, individuals can execute illegal cartel acts in a self-enforcing and non-judicial manner. Cartel members can then implement collective deviations without help from trusted intermediaries or any requirements on reputation or word-of-honor. We show that a first price auction is vulnerable to cartel threats even if the seller can hide bidders’ prices because bidders take a countermeasure to hidden prices by using blockchain.
    Date: 2019–05
  28. By: Bernardo S. Buarque; Ronald B. Davies; Dieter F. Kogler; Ryan M. Hynes
    Abstract: This paper investigates the creation and integration of Artificial Intelligence (AI) patents in Europe. We create a panel of AI patents over time, mapping them into regions at the NUTS2 level. We then proceed by examining how AI is integrated into the knowledge space of each region. In particular, we find that those regions where AI is most embedded into the innovation landscape are also those where the number of AI patents is largest. This suggests that to increase AI innovation it may be necessary to integrate it with industrial development, a feature central to many recent AI-promoting policies.
    Keywords: Artificial Intelligence; Geography of Innovation; Knowledge Space; Technological Change; Regional Studies
    JEL: O33 O31 R11
    Date: 2019–05
  29. By: Francisco B. Galarza (Universidad del Pacífico); Fernando Requejo (Universidad del Pacífico)
    Abstract: We study the impact of two-sided incentives on the reduction of informality. We model those incentives using the notion of network externalities, which link the (formal or informal) merchant’s profits to the type of customers they serve (formal or informal). Our theoretical framework yields two straightforward testable implications: the merchant will find more profitable to become formal (or informal), as long as more of their customers are formal (or informal); and, formal and informal commercial sectors may coexist in equilibrium. We test these hypotheses using data from a field experiment, conducted with micro and small enterprises in Lima, Peru. Our subjects had to choose, in a repeated fashion, among three ‘platforms’, which proxy for being formal, informal, or performing a reservation activity. We then changed the relative size of the network of formal vis-á-vis informal customers, in order to calculate the consumer’s network externality. We find that the network externality is relatively large, a result that opens up the possibility to reduce commercial informality using two-sided incentives. Moreover, the platform choice between the formal and informal sectors is sensitive to risk preferences.
    Keywords: Network externality, informality, two-sided incentives, experiments
    JEL: C93 E26 O17
    Date: 2019–06
  30. By: Lena Edlund; Cecilia Machado
    Abstract: US homicide rates fell sharply in the early 1990s, a decade that also saw the mainstreaming of cell phones – a concurrence that may be more than a coincidence, we propose. Cell phones may have undercut turf-based street dealing, thus undermining drug-dealing profits of street gangs, entities known to engage in violent crime. Studying county-level data for the years 1970-2009 we find that the expansion of cellular phone service (as proxied by antenna-structure density) lowered homicide rates in the 1990s. Furthermore, effects were concentrated in urban counties; among Black or Hispanic males; and more gang/drug-associated homicides.
    JEL: I0 I18 R0
    Date: 2019–05

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.