nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2020‒03‒09
sixteen papers chosen by

  1. CBDC and Monetary Sovereignty By Antonio Diez de los Rios; Yu Zhu
  2. CBDC and Monetary Policy By Mohammad Davoodalhosseini; Francisco Rivadeneyra; Yu Zhu
  3. The Development of Digital Economy in Indonesia By Joanita, Regina
  4. Criptocurrencies, Fiat Money, Blockchains and Databases By Jorge Barrera
  5. Pricing Bitcoin Derivatives under Jump-Diffusion Models By Pablo Olivares
  6. Technology Approach for a CBDC By Dinesh Shah; Rakesh Arora; Han Du; Sriram Darbha; John Miedema; Cyrus Minwalla
  7. Eliciting Preferences of Ride-Hailing Users and Drivers By Prateek Bansal; Akanksha Sinha; Rubal Dua; Ricardo Daziano
  8. Empirical Analysis of Indirect Internal Conversions in Cryptocurrency Exchanges By Paz Grimberg; Tobias Lauinger; Damon McCoy
  9. The Limits of onetary Economics : On Money as a Latent Medium of Exchange By Ricardo Lagos; Shengxing Zhang
  10. How Is Technology Changing the Mortgage Market? By Andreas Fuster; James Vickery; Matthew Plosser
  11. The Impact of Mobile Money on Poor Rural Households : Experimental Evidence from Uganda By Wieser,Christina; Bruhn,Miriam; Kinzinger,Johannes Philipp; Ruckteschler,Christian Simon; Heitmann,Soren
  12. Pricing for the Stars - Dynamic Pricing in the Presence of Rating Systems By André Stenzel; Christoph Wolf; Peter Schmidt
  13. Deciphering Americans’ Views on Cryptocurrencies By Sean Hundtofte; Michael Junho Lee; Antoine Martin; Reed Orchinik
  14. Firms Default Prediction with Machine Learning By Tesi Aliaj; Aris Anagnostopoulos; Stefano Piersanti
  15. African jobs in the digital era: Export options with a focus on online labour By Melia, Elvis
  16. Blockchain electricity trading using tokenised power delivery contracts By Devine, Mel; Russo, Marianna; Cuffe, Paul

  1. By: Antonio Diez de los Rios; Yu Zhu
    Abstract: In an increasingly digitalized world, issuers of private digital currency can weaken central banks’ ability to stabilize the economy. By continuing to make central bank money attractive as a payment instrument in a digital world, a central bank digital currency (CDBC) could help to maintain a country’s monetary sovereignty.
    Keywords: Digital Currencies and Fintech; Monetary Policy
    JEL: E E5 E52 E58 F F5 F55 G G1 G15
    Date: 2020–02
  2. By: Mohammad Davoodalhosseini; Francisco Rivadeneyra; Yu Zhu
    Abstract: Improving the conduct of monetary policy is unlikely to be the main motivation for central banks to issue a central bank digital currency (CBDC). While some argue that a CBDC could allow more complex transfer schemes or the ability to break below the zero lower bound, we find these benefits might be small or difficult to realize in practice.
    Keywords: Digital Currencies and Fintech; Monetary Policy; Payment clearing and settlement systems
    JEL: E E4 E41 E5 E51 E52
    Date: 2020–02
  3. By: Joanita, Regina
    Abstract: Industrial Era 4.0 changed the entire chain and management of all branches of industry with various technologies. All financial-based services are developing rapidly in Indonesia marked by the emergence of many start-up companies. Rapid changes to digital banking and financial technology show that technology can play a strategic role in providing financial services that can be accessed quickly. The availability of digital banking services and products is highly valued by customers, both individuals and business people, especially in Micro, Small and Medium Enterprises (MSME). The large selection of digital banking products is certainly intended to motivate customers to love and be loyal customers and become part of the modern lifestyle. The presence of the digital economy is a new opportunity as well as a serious threat to the banking industry that is churning into digital banking in order to retain customers and attract new customers from millennials.
    Date: 2020–02–25
  4. By: Jorge Barrera
    Abstract: Two taxonomies of money that include cryptocurrencies are analyzed. A definition of the term cryptocurrency is given and a taxonomy of them is presented, based on how its price is fixed. The characteristics of the use of current fiat money and the operation of two-level banking systems are discussed. Cryptocurrencies are compared with fiat money and the aspects in which the latter cannot be overcome are indicated. The characteristics of blockchains and databases are described. The possible cases of use of both technologies are compared, and it is noted that blockchains, in addition to cryptocurrencies and certain records, have not yet shown their usefulness, while databases constitute the foundation of most of the automated systems in operation.
    Date: 2020–02
  5. By: Pablo Olivares
    Abstract: In recent years cryptocurrency trading has captured the attention of practitioners and academics. The volume of the exchange with standard currencies has known a dramatic increasing of late. This paper addresses to the need of models describing a bitcoin-US dollar exchange dynamic and their use to evaluate European option having bitcoin as underlying asset.
    Date: 2020–02
  6. By: Dinesh Shah; Rakesh Arora; Han Du; Sriram Darbha; John Miedema; Cyrus Minwalla
    Abstract: In this note, we highlight a range of technical options and considerations in designing a contingent system for a central bank digital currency (CBDC) in Canada and explore how these options achieve stated public policy goals.
    Keywords: Central bank research; Digital Currencies and Fintech
    JEL: E E4 E42 E5 E51 O O3 O31
    Date: 2020–02
  7. By: Prateek Bansal; Akanksha Sinha; Rubal Dua; Ricardo Daziano (King Abdullah Petroleum Studies and Research Center)
    Abstract: The ‘ride-hailing’ services offered by transportation network companies (TNCs) such as Uber and Lyft have rapidly disrupted personal transportation, particularly in cities. Schaller (2018) reports that TNCs provided 2.6 billion rides in 2017 in the United States (U.S.), a 37% increase from 2016. The rapid increase in the adoption of TNC services can be attributed to the ease of access offered by smartphone applications and the higher availability of cars and drivers compared to regulated, traditional taxi services.
    Keywords: Transportation, Ride-hailing, Transportation Network Companies (TNCs)
    Date: 2020–02–24
  8. By: Paz Grimberg; Tobias Lauinger; Damon McCoy
    Abstract: Algorithmic trading is well studied in traditional financial markets. However, it has received less attention in centralized cryptocurrency exchanges. The Commodity Futures Trading Commission (CFTC) attributed the $2010$ flash crash, one of the most turbulent periods in the history of financial markets that saw the Dow Jones Industrial Average lose $9\%$ of its value within minutes, to automated order "spoofing" algorithms. In this paper, we build a set of methodologies to characterize and empirically measure different algorithmic trading strategies in Binance, a large centralized cryptocurrency exchange, using a complete data set of historical trades. We find that a sub-strategy of triangular arbitrage is widespread, where bots convert between two coins through an intermediary coin, and obtain a favorable exchange rate compared to the direct one. We measure the profitability of this strategy, characterize its risks, and outline two strategies that algorithmic trading bots use to mitigate their losses. We find that this strategy yields an exchange ratio that is $0.144\%$, or $14.4$ basis points (bps) better than the direct exchange ratio. $2.71\%$ of all trades on Binance are attributable to this strategy.
    Date: 2020–02
  9. By: Ricardo Lagos; Shengxing Zhang
    Abstract: We formulate a generalization of the traditional medium-of-exchange function of money in contexts where there is imperfect competition in the intermediation of credit, settlement, or payment services used to conduct transactions. We find that the option to settle transactions directly with money strengthens the stance of sellers of goods and services vis-á-vis intermediaries. We show this mechanism is operative even for sellers who never exercise the option to sell for cash, and that these "latent money demand" considerations imply monetary policy remains effective through medium-of-exchange channels even if the share of monetary transactions is arbitrarily small.
    JEL: D83 E5 G12
    Date: 2020–02
  10. By: Andreas Fuster (Schweizerische Nationalbank; Federal Reserve Bank of New York; National Bureau of Economic Research); James Vickery; Matthew Plosser
    Abstract: The adoption of new technologies is transforming the mortgage industry. For instance, borrowers can now obtain a mortgage entirely online, and lenders use increasingly sophisticated methods to verify borrower income and assets. In a recent staff report, we present evidence suggesting that technology is reducing frictions in mortgage lending, such as reducing the time it takes to originate a mortgage, and increasing the elasticity of mortgage supply. These benefits do not seem to come at the cost of less careful screening of borrowers.
    Keywords: refinance; mortgage; technology
    JEL: G2
  11. By: Wieser,Christina; Bruhn,Miriam; Kinzinger,Johannes Philipp; Ruckteschler,Christian Simon; Heitmann,Soren
    Abstract: This paper studies the effect of rolling out mobile money agents in rural Northern Uganda. In a randomized experiment, 168 areas were randomly selected to receive an agent in 2017, with another 163 areas serving as a control group. Administrative data on mobile money transactions suggest that the agent rollout increased the probability of sending and receiving peer-to-peer transfers. Data from a 2018 survey of more than 4,500 households show that the agent rollout led to cost-savings for remittance transactions. It also doubled the nonfarm self-employment rate, from 3.4 to 6.4 percent, and reduced the fraction of households with very low food security from 62.9 to 47.2 percent, in areas far from a bank branch. The analysis finds no effect on savings, agricultural outcomes, or poverty. Overall, the findings add new evidence that mobile money can improve livelihoods even in poor and remote settings.
    Keywords: ICT Economics,Inequality,Employment and Unemployment,Transport Services,Nutrition,Food Security
    Date: 2019–06–25
  12. By: André Stenzel; Christoph Wolf; Peter Schmidt
    Abstract: Maintaining good ratings increases the profits of sellers on online platforms. We analyze the role of strategic pricing for ratings management in a setting where a monopolist sells a good of unknown quality. Higher prices reduce the value for money, which on average worsens reviews. However, they also induce only consumers with a strong taste for the product to purchase, which on average improves reviews. We provide conditions under which the latter effect dominates so that ratings management leads to upward pressure on prices. This upward pressure increases in the sensitivity of the aggregate rating to incoming reviews. As a consequence, recent changes to rating systems may have harmed consumers by increasing long-run price levels.
    Keywords: Rating Systems, Dynamic Pricing, Asymmetric Information
    JEL: D21 D82 L15
    Date: 2020–02
  13. By: Sean Hundtofte; Michael Junho Lee; Antoine Martin; Reed Orchinik (Research and Statistics Group)
    Abstract: Having witnessed the dramatic rise and fall in the value of cryptocurrencies over the past year, we wanted to learn more about what motivates people to participate in this market. To find out, we included a special set of questions in the May 2018 Survey of Consumer Expectations, a project of the New York Fed?s Center for Microeconomic Data. This blog post summarizes the results of that survey, shedding light on U.S. consumers? depth of participation in cryptocurrencies and their motives for entering this new market.
    Keywords: Bitcoin; Cryptocurrency
    JEL: E5
  14. By: Tesi Aliaj; Aris Anagnostopoulos; Stefano Piersanti
    Abstract: Academics and practitioners have studied over the years models for predicting firms bankruptcy, using statistical and machine-learning approaches. An earlier sign that a company has financial difficulties and may eventually bankrupt is going in \emph{default}, which, loosely speaking means that the company has been having difficulties in repaying its loans towards the banking system. Firms default status is not technically a failure but is very relevant for bank lending policies and often anticipates the failure of the company. Our study uses, for the first time according to our knowledge, a very large database of granular credit data from the Italian Central Credit Register of Bank of Italy that contain information on all Italian companies' past behavior towards the entire Italian banking system to predict their default using machine-learning techniques. Furthermore, we combine these data with other information regarding companies' public balance sheet data. We find that ensemble techniques and random forest provide the best results, corroborating the findings of Barboza et al. (Expert Syst. Appl., 2017).
    Date: 2020–02
  15. By: Melia, Elvis
    Abstract: This study asks what impact the Fourth Industrial Revolution will have on job creation and catchup development in Sub-Saharan Africa over the coming decade. Can light manufacturing export sectors still serve African development the way they served East Asian development in the past? If factory floor automation reduces the need for low-cost labour in global value chains, can IT-enabled services exports become an alternative driver of African catch-up development? I present case study evidence from Kenya to show that online freelancing has become an interesting sector, both in terms of its growth trajectory, and in terms of worker upward mobility in the global knowledge economy. As life everywhere moves further into the digital realm, and global internet connectivity between Africa and the rest of the world grows, more and more young Africans who stream onto the labour market may find work in the world of global online freelancing. I discuss the building blocks needed to make online work a sustainable vehicle for African catch-up development in the years ahead.
    Date: 2020
  16. By: Devine, Mel; Russo, Marianna; Cuffe, Paul
    Date: 2019

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