nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2021‒02‒08
33 papers chosen by

  1. Eggs in One Basket: Security and Convenience of Digital Currencies By Charles M. Kahn; Francisco Rivadeneyra; Tsz-Nga Wong
  2. Restrictions on Privacy and Exploitation in the Digital Economy: A Market Failure Perspective By Nicholas Economides; Ioannis Lianos
  3. Competition in the digital economy: An analysis of gatekeepers and regulations By Büchel, Jan; Rusche, Christian
  4. "The Economic Problem: From Barter to Commodity Money to Electronic Money" By Jan Kregel
  5. Learning to Navigate a New Financial Technology: Evidence from Payroll Accounts By Emily Breza; Martin Kanz; Leora F. Klapper
  6. Challenging Practical Features of Bitcoin by the Main Altcoins By Andrew Spurr; Marcel Ausloos
  7. Market Definition in the Platform Economy By Jens-Uwe Franck; Martin Peitz
  8. Modelling Universal Order Book Dynamics in Bitcoin Market By Fabin Shi; Nathan Aden; Shengda Huang; Neil Johnson; Xiaoqian Sun; Jinhua Gao; Li Xu; Huawei Shen; Xueqi Cheng; Chaoming Song
  9. Digital platforms and antitrust By Geoffrey Parker; Georgios Petropoulos; Marshall Van Alstyne
  10. Implications of Banking Regulations on Online Payment Failures By Chawla, Aditi; Manjhi, Ganesh; Bhattacharya, Gaurav
  11. Platform competition in the tablet PC market: The effect of application quality By Thanh Doan; Fabio Maria Manenti; Franco Mariuzzo
  12. Does FinTech Substitute for Banks? Evidence from the Paycheck Protection Program By Erel, Isil; Liebersohn, Jack
  13. The Market for Fake Reviews By He, Sherry; Hollenbeck, Brett; Proserpio, Davide
  14. Acceptance of Data Sharing in Smartphone Apps from Key Industries of the Digital Transformation: A Representative Population Survey from Germany By Svenja Mohr; Janis Cloos
  15. Digital Connectivity in sub-Saharan Africa: A Comparative Perspective By Emre Alper; Michal Miktus
  16. Cash and the Hidden Economy: Laboratory and Artefactual Field Experimental Evidence on Fighting Tax Evasion in Small Business Transactions By Ho Fai Chan; Uwe Dulleck; Jonas Fooken; Naomi Moy; Benno Torgler
  17. The Role of Digital Media in Public Awareness During the Coronavirus (COVID-19) Pandemic By Yosra Sobeih; Rasha Samir
  18. Nominal Contracts and the Payment System By Hajime Tomura
  19. Pandemic recession, helicopter money and central banking: Venice, 1630 By Goodhart, C. A. E.; Masciandaro, Donato; Ugolini, Stefano
  20. Do Old Habits Die Hard? Central Banks and the Bretton Woods Gold Puzzle By Eric Monnet; Damien Puy
  21. Managing Stablecoins: Optimal Strategies, Regulation, and Transaction Data as Productive Capital By Li, Ye; Mayer, Simon
  22. Platform mergers and antitrust By Geoffrey Parker; Georgios Petropoulos; Marshall Van Alstyne
  23. Determinants of penetration rate of “Identify Number Card”in Japan By Akinobu Ogawa; Nobuo Akai
  24. Digitalization to Improve Tax Compliance: Evidence from VAT e-Invoicing in Peru By Matthieu Bellon; Jillie Chang; Era Dabla-Norris; Salma Khalid; Frederico Lima; Enrique Rojas; Pilar Villena
  25. Dynamic Curves for Decentralized Autonomous Cryptocurrency Exchanges By Bhaskar Krishnamachari; Qi Feng; Eugenio Grippo
  26. Comparison of the effects of investor attention using search volume data before and after mobile device popularization By Jonghyeon Min
  27. Complex Systems Modeling of Community Inclusion Currencies By Andrew Clark; Alexander Mihailov; Michael Zargham
  28. Indonesian MSME E-Commerce among the Covid-19 Pandemic By Elya Kurniawati
  29. Why is Intermediating Houses so Difficult? Evidence from iBuyers By Greg Buchak; Gregor Matvos; Tomasz Piskorski; Amit Seru
  30. Central Bank Digital Currency: When Price and Bank Stability Collide By Linda Schilling; Jesús Fernández-Villaverde; Harald Uhlig
  31. Measuring Movement and Social Contact with Smartphone Data: A Real-time Application to COVID-19 By Victor Couture; Jonathan I. Dingel; Allison Green; Jessie Handbury; Kevin Williams
  32. Permissioned Distributed Ledgers and the Governance of Money By Raphael Auer; Cyril Monnet; Hyun Song Shin
  33. A tale of paper and gold: the material history money in South Africa By Feingold, Ellen; Fourie, Johan; Gardner, Leigh

  1. By: Charles M. Kahn; Francisco Rivadeneyra; Tsz-Nga Wong
    Abstract: Digital currencies store balances in anonymous electronic addresses. We analyze the trade-offs between the safety and convenience of aggregating balances in addresses, electronic wallets and banks. In our model, agents balance the risk of theft of a large account with the cost to safeguarding a large number of passwords for many small accounts. Account custodians (banks, wallets and other payment service providers) have different objectives and trade-offs along these dimensions; we analyze the welfare effects of differing industry structures and interdependencies. In particular, we examine, the consequences of “password aggregation" programs, which, in effect, consolidate risks across accounts.
    Keywords: Central bank research; Digital currencies and fintech; Financial services; Payment clearing and settlement systems
    JEL: E42 E51 E58
    Date: 2021–01
  2. By: Nicholas Economides (Professor of Economics, NYU Stern School of Business, New York, New York 10012); Ioannis Lianos (Professor of Global Competition Law and Public Policy, Faculty of Laws, University College London, and Hellenic Competition Commission)
    Abstract: We discuss how the acquisition of private information by default without compensation by digital platforms such as Google and Facebook creates a market failure and can be grounds for antitrust enforcement. To avoid the market failure, the default in the collection of personal information has to be changed by law to “opt-out.” This would allow the creation of a vibrant market for the sale of users’ personal information to digital platforms. Assuming that all parties are perfectly informed, users are better off in this functioning market and digital platforms are worse off compared to the default opt-in. However, just switching to a default opt-in will not restore competition to the but for world because of the immense market power and bargaining power towards an individual user that digital platforms have acquired. Digital platforms can use this power to reduce the compensation that a user would receive for his/her personal information compared to a competitive world. Additionally, it is likely that the digital platforms are much better informed than the user in this market, and can use this information to disadvantage users in the market for personal information.
    Keywords: personal information; Internet search; Google; Facebook; digital; privacy; restrictions of competition; exploitation; market failure; hold up; merger; abuse of a dominant position; unfair commercial practices; excessive data extraction; self-determination; behavioral manipulation; remedies; portability; opt-in; opt-out.
    JEL: K21 L1 L12 L4 L41 L5 L86 L88
    Date: 2020–09
  3. By: Büchel, Jan; Rusche, Christian
    Abstract: The Digital Age saw the rise of several rapidly growing digital platforms with substantial market shares. Europe is a large target market for these globally operating platforms, although the majority of the most successful platforms come from the USA or Asia. In general, platform ecosystems differ from regular market environments: platforms extend to several markets and user groups at the same time and there is an increased degree of dynamics in the allocation of market shares in platform ecosystems, which leads to a pressure to constantly innovate. Platform ecosystems vary among themselves, not least due to the different types of platform business models or their varying impact on the whole sector. Recent developments have included the emergence of particularly overwhelming platforms, known as "gatekeepers", that control entire platform ecosystems. A gatekeeper obtains durable and stable significant market power in the market for intermediation services, it has a large impact on the underlying market(s) and it is vital for users from all sides of the platform. In contrast to conventional platforms, for gatekeepers the ability to contest any of the markets is significantly reduced from the perspective of competing platforms, not least due to significant lock-in effects for consumers. But too tight regulation and pre-emptive intervention without any occasion is not preferable. Rash and untailored action negatively affects the development and growth opportunities for online platforms that do not intend to breach existing competition rules. Indirectly, that harms consumers, by restricting innovation and the availability of products and services. Tailored procedures for individual large online platforms with gatekeeper power on a case-by-case basis are more expedient. Thereby the current regulatory framework is capable of acting and builds on established legal pillars. However, tailored modernisation and adaption, for example in merger control, is helpful for ensuring fair competition. Merger control can be empowered by including data and other synergies between involved enterprises into assessments in order to prevent the formation of gatekeepers.
    JEL: G34 K21 L12
    Date: 2020
  4. By: Jan Kregel
    Abstract: The success of alternative payment systems has led to discussion of various proposals to replace money with a new technology-based system, though many lack a clear idea of what exactly is the "money" they seek to replace. We begin by presenting the explanation of money's role in the economy embraced by most mainstream economists and policy analysts, based on the idea that money evolved out of the process of market exchange. An alternative explanation that looks on money as a part of the organization of production and distribution based on network clearing systems across balance sheets expressed in a common unit of account is then presented, distinguishing between a purely notional unit of account and means of settlement or discharge of debt. The final section addresses the possibility of a fundamentally different modern extension of this alternative approach that is not inspired by digital technology, distributed ledger accounting, or application operating on a mobile/cell phone system, but rather the actually existing system available from an internet telephone service provider that currently offers subsidiary domestic and international payment services whose operating procedures come close to replicating the alternative explanation of money mentioned above, with the potential to provide all the services of the existing payments system at lower costs and greater stability.
    Keywords: Banking Principle; Clearing Union; Imaginary Money; Money; Payment Systems; Unit of Account;
    JEL: B5 E42 E50 G2
    Date: 2021–01
  5. By: Emily Breza; Martin Kanz; Leora F. Klapper
    Abstract: How do inexperienced consumers learn to use a new financial technology? We present results from a field experiment that introduced payroll accounts in a population of largely unbanked factory workers in Bangladesh. In the experiment, workers in a treatment group received monthly wage payments into a bank or mobile money account while workers in a control group continued to receive wages in cash, with a subset also receiving an account without automatic wage payments. We find that exposure to payroll accounts leads to increased account use and consumer learning. Those receiving accounts with automatic wage payments learn to use the account without assistance, begin to use a wider set of account features, and learn to avoid illicit fees, which are common in emerging markets for consumer finance. The treatments have real effects, leading to increased savings and improvements in the ability to cope with unanticipated economic shocks. We conduct an additional audit study and find suggestive evidence of market externalities from consumer learning: mobile money agents are less likely to overcharge inexperienced customers in areas with higher levels of payroll account adoption. This suggests potentially important equilibrium effects of introducing accounts at scale.
    JEL: G21 G5 O16
    Date: 2020–12
  6. By: Andrew Spurr; Marcel Ausloos
    Abstract: We study the fundamental differences that separate: Litecoin; Bitcoin Gold; Bitcoin Cash; Ethereum; and Zcash from Bitcoin, and draw analysis to how these features are appreciated by the market, to ultimately make an inference as to how future successful cryptocurrencies may behave. We use Google Trend data, as well as price, volume and market capitalization data sourced from to support this analysis. We find that Litecoin's shorter block times offer benefits in commerce, but drawbacks in the mining process through orphaned blocks. Zcash holds a niche use for anonymous transactions, benefitting areas of the world lacking in economic freedom. Bitcoin Cash suffers from centralization in the mining process, while the greater decentralization of Bitcoin Gold has generally left it to stagnate. Ether's greater functionality offers the greatest threat to Bitcoin's dominance in the market. A coin that incorporates several of these features can be technically better than Bitcoin, but the first-to-marketadvantage of Bitcoin should keep its dominant position in the market.
    Date: 2020–12
  7. By: Jens-Uwe Franck; Martin Peitz
    Abstract: The article addresses the role market definition can play for EU competition practice in the platform economy. The focus is on intermediaries that bring together two (or more) groups of users whose decisions are interdependent and which therefore are commonly referred to as “two-sided platforms”. We address challenges to market definition that accompany these cross-group network effects, assess current practice in a number of cases with the European Commission and Member States’ competition authorities, and provide guidance on how practice is to be adapted to properly account for the economic forces shaping markets with two-sided platforms. Owing to the complementarities of services provided to the user groups the platforms cater to, the question arises whether and when a single market can be defined that encompasses both sides. We advocate a multi-markets approach that takes account of cross-market linkages, acknowledges the existence of zero-price markets, and properly accounts for the homing behaviour of market participants.
    Keywords: antitrust law, EU competition practice, market definition, market power, Market Definition Notice, two-sided platforms, digital markets, network effects, matching platforms, zero-price markets, homing decisions, SSNIP test
    JEL: K21
    Date: 2021–01
  8. By: Fabin Shi; Nathan Aden; Shengda Huang; Neil Johnson; Xiaoqian Sun; Jinhua Gao; Li Xu; Huawei Shen; Xueqi Cheng; Chaoming Song
    Abstract: Understanding the emergence of universal features such as the stylized facts in markets is a long-standing challenge that has drawn much attention from economists and physicists. Most existing models, such as stochastic volatility models, focus mainly on price changes, neglecting the complex trading dynamics. Recently, there are increasing studies on order books, thanks to the availability of large-scale trading datasets, aiming to understand the underlying mechanisms governing the market dynamics. In this paper, we collect order-book datasets of Bitcoin platforms across three countries over millions of users and billions of daily turnovers. We find a 1+1D field theory, govern by a set of KPZ-like stochastic equations, predicts precisely the order book dynamics observed in empirical data. Despite the microscopic difference of markets, we argue the proposed effective field theory captures the correct universality class of market dynamics. We also show that the model agrees with the existing stochastic volatility models at the long-wavelength limit.
    Date: 2021–01
  9. By: Geoffrey Parker; Georgios Petropoulos; Marshall Van Alstyne
    Abstract: Digital platforms are at the heart of online economic activity, connecting multi-sided markets of producers and consumers of various goods and services. Their market power and their privileged ecosystem positions raise concerns that they may engage in anti-competitive practices that reduce innovation and consumer welfare. This paper deals with the role of market competition and regulation in addressing these concerns. Traditional (ex-post) antitrust intervention will be less effective in markets...
    Date: 2020–11
  10. By: Chawla, Aditi; Manjhi, Ganesh; Bhattacharya, Gaurav
    Abstract: This paper explores the `latent economy' of online transaction failure that prevails in the digital payment system. A two-variant model of profit, with a different cost function in each variant, has been proposed to examine the profit of commercial banks. The model considers that when an online transaction fails, banks use the money held in the Unified Payment System to earn revenue in the form of interest income by investing the same. The theoretical exposition of the model has been corroborated by simulation by assuming feasible parametric restrictions and exogenous values. The paper finds that commercial banks make profit by using the held amount at the existing cost. As the proportion of the held money used by the banks increases, their profits increase and the commercial banks incur losses when an `alternative cost' with stricter penalties is imposed.
    Keywords: Digital Payments, Transaction Failure, UPI Payment Failure
    JEL: E58 G18 G28 L51
    Date: 2021–01–16
  11. By: Thanh Doan (Centre for Competition Policy and School of Economics, University of East Anglia); Fabio Maria Manenti (Department of Economics and Management, University of Padua); Franco Mariuzzo (Centre for Competition Policy and School of Economics, University of East Anglia)
    Abstract: Apple iOS is a closed platform; Google Android is open. In this paper, we combine data on iOS and Android tablet sales with dat a on the top 1000 mobile applications from both platforms for five European countries and estimate a structural demand model. We find that the quality of applications affects tablet demand. We then run two counterfactuals. In line with our theory, the exclusion of low-quality applications is beneficial to tablet producers in both platforms but is more pronounced for Apple. Tablet producers in the plat form with lower quality applications gain most from cross-platform app interoperability.
    Keywords: Android, indirect quality effect, iOS, mobile application, tablet demand
    JEL: L13 L15 L51 L63
    Date: 2020–12–01
  12. By: Erel, Isil (Ohio State U and European Corporate Governance Institute); Liebersohn, Jack (U of California, Irvine)
    Abstract: New technology promises to expand the supply of financial services to small businesses poorly served by the banking system. Does it succeed? We study the response of FinTech to financial services demand created by the introduction of the Paycheck Protection Program (PPP). We find that FinTech is disproportionately used in ZIP codes with fewer bank branches, lower incomes, and a larger minority share of the population, as well as in industries with little ex ante small-business lending. FinTech's role in PPP provision is also greater in counties where the economic effects of the COVID-19 pandemic were more severe. We estimate that more PPP provision by traditional banks causes sta- tistically significant but economically small substitution away from FinTechs, implying that FinTech mostly expands the overall supply of financial services, rather than redistributing it.
    JEL: E6 G21 G23 G28 G38 H25 H32 I38
    Date: 2020–10
  13. By: He, Sherry; Hollenbeck, Brett; Proserpio, Davide
    Abstract: We study the market for fake product reviews on These reviews are purchased in large private internet groups on Facebook and other sites. We hand-collect data on these markets to characterize the types of products that buy fake reviews and then collect large amounts of data on the ratings and reviews posted on Amazon for these products, as well as their sales rank, advertising, and pricing behavior. We use this data to assess the costs and benefits of fake reviews to sellers and evaluate the degree to which they harm consumers. The theoretical literature on review fraud shows that there exist conditions when they harm consumers and other conditions where they function as simply another type of advertising. Using detailed data on product outcomes before and after they buy fake reviews we can directly determine if these are low-quality products using fake reviews to deceive and harm consumers or if they are possibly high-quality products who solicit reviews to establish reputations. We find that a wide array of products purchase fake reviews including products with many reviews and high average ratings. Soliciting fake reviews on Facebook leads to a significant increase in average rating and sales rank, but the effect disappears after roughly one month. After firms stop buying fake reviews their average ratings fall significantly and the share of one-star reviews increases significantly, indicating fake reviews are mostly used by low quality products and are deceiving and harming consumers. We also observe that Amazon deletes large numbers of reviews and we document their deletion policy.
    Keywords: Online platforms, consumer protection, e-commerce, word-of-mouth
    JEL: K42 L15 L51 L81 M21 M31
    Date: 2021–01–21
  14. By: Svenja Mohr (Justus Liebig University Giessen); Janis Cloos (Clausthal University of Technology)
    Abstract: The use of smartphone apps has numerous advantages for app providers and users. However, the users of many smartphone apps are confronted with a trade-off between usage benefits and preferences for personal data protection. We investigate the acceptability of data sharing in different hypothetical scenarios describing five types of these apps from key industries of the digital transformation. In a representative survey for the German population (ð ‘ =1,013), we examine to what extent the acceptance of data sharing is influenced by potential recipients, collected information attributes, and the promoted benefits of data sharing. We differentiate the promoted benefits in two treatments according to monetary (or personal) and environmental (or public) benefits. Our results show no treatment effects but significant differences in acceptance values for different recipients and information attributes. We further observe that participants with stronger green consumption values, participants with a stronger risk propensity, men, and younger participants show a higher acceptance towards data sharing in the described scenarios.
    Keywords: privacy, digitalization, digital transformation, representative survey, data protection, environmental attitudes
    JEL: O33 Q18 C83 L86 M31 M37
    Date: 2021
  15. By: Emre Alper; Michal Miktus
    Abstract: Higher digital connectivity is expected to bring opportunities to leapfrog development in sub-Saharan Africa (SSA). Experience within the region demonstrates that if there is an adequate digital infrastructure and a supportive business environment, new forms of business spring up and create jobs for the educated as well as the less educated. The paper first confirms the global digital divide through the unsupervised machine learning clustering K-means algorithm. Next, it derives a composite digital connectivity index, in the spirit of De Muro-Mazziotta-Pareto, for about 190 economies. Descriptive analysis shows that majority of SSA countries lag in digital connectivity, specifically in infrastructure, internet usage, and knowledge. Finally, using fractional logit regressions we document that better business enabling and regulatory environment, financial access, and urbanization are associated with higher digital connectivity.
    Keywords: Information technology in revenue administration;Infrastructure;Population and demographics;Machine learning;Income;WP,digital connectivity,EDAI SSA distribution,account ownership,ICT indicators database,SSA countries lag
    Date: 2019–09–27
  16. By: Ho Fai Chan; Uwe Dulleck; Jonas Fooken; Naomi Moy; Benno Torgler
    Abstract: Increasing the tax compliance of self-employed business owners (particularly of trade- specific service providers) remains an ongoing challenge for tax authorities. From a compliance point of view, cash transactions are particularly problematic when services are paid for on the spot, as such exchanges are difficult to audit. As a novelty we present experimental evidence testing 11 different policy strategies in a setting that allows for cash transactions. Our sample includes both students and non-students active in service industries characterised by the opportunity to engage in cash transactions. While our results offer a positive outlook for the interventions reporting a significant effect, they particularly speak to the potential of moral suasion to increase compliance, as it may be implemented at relatively low cost. However, a carrot (offering support in tax declarations) as well as a stick (increasing the threat of audits) approach may be promising for increased compliance, especially where there is an evasion opportunity in cash-for-service payments between small businesses and individual customers who may share a common benefit from tax evasion. A stick approach is particularly efficient for those inclined to use cash transactions.
    Date: 2021–01
  17. By: Yosra Sobeih (Taibah University, Kingdom of Saudi Arabia and Alshrouk Academy); Rasha Samir (Gulf University, Bahrain and Alshrouk Academy)
    Abstract: This paper aims to monitor the role of digital media in facing the COVID-19 pandemic, as the media play a prominent and essential role in building images of reality among the public through the information they provide, and from here comes the role of the media in general and digital media in particular in contributing. In creating awareness among the masses of how to deal with this crisis, the media play a fundamental role during disasters and crises, as they work to deliver the necessary information to the public and the general public, as well as interpret events, provide moral support to affected communities, and contribute to digital coverage that is characterized by speed and keeping pace with events. Disasters and crises play a very important role in determining and shaping trends towards what is happening. The results indicate that some Arab countries have taken advantage of the effective role of digital media in facing the crisis and raising awareness about it, and the Kingdom of Saudi Arabia scored first in facing this crisis by launching many applications that served citizens very much during the crisis and by launching many digital means on websites and their issuance through mobile applications, which facilitates the process of communicating with citizens, educating them and protecting their health, which had a great impact on controlling the crisis.
    Keywords: Digital Media, Awareness, Coronavirus
    Date: 2020–12
  18. By: Hajime Tomura (Faculty of Political Science and Economics, Waseda University)
    Abstract: This paper introduces into an overlapping generations model the courts inability to distinguish different qualities of goods of the same kind. Given the recognizability of fiat money for the court, this friction leads to the use of nominal debt contracts as well as the use of fiat money as a means of payment in the goods market. This result holds without dynamic inefficiency or lack of double coincidence of wants. Instead, money is necessary because it is essential for credit. However, there can occur a shortage of real money balances for liability settlements, even if the money supply follows a Friedman rule. This problem can be resolved if the central bank can lend fiat money to agents elastically at a zero intraday interest rate within each period. Given the economy being dynamically efficient, this policy makes the money supply cease to be the nominal anchor for the price level. In this case, the monetary steady state becomes compatible with other nominal anchors than the money supply.
    Keywords: Nominal contract; Discount window; Trade credit; Cashless economy; Payment system; Legal tender
    JEL: E42 E51 E58
    Date: 2020–03
  19. By: Goodhart, C. A. E.; Masciandaro, Donato; Ugolini, Stefano
    Abstract: This paper analyses the monetary policy that the Most Serene Republic of Venice implemented in the years of calamities using a modern equivalent of helicopter money, precisely an extraordinary money issuing, coupled with capital losses for the issuer. We consider the 1629 famine and the 1630-1631 plague as a negative macroeconomic shock that the incumbent government addressed using fiscal monetization. Consolidating the balance sheets of the Mint and of the Giro Bank, and having heterogenous citizens - inequality matters - we show that the Republic implemented what was, in effect, helicopter money driven by political economy reasons, in order to avoid popular riots.
    Keywords: central banking; helicopter money; monetary policy; pandemic; Venice 1630
    JEL: D70 E50 E60 N10 N20
    Date: 2021–01
  20. By: Eric Monnet; Damien Puy
    Abstract: Why did monetary authorities hold large gold reserves under Bretton Woods (1944–1971) when only the US had to? We argue that gold holdings were driven by institutional memory and persistent habits of central bankers. Countries continued to back currency in circulation with gold reserves, following rules of the pre-WWII gold standard. The longer an institution spent in the gold standard (and the older the policymakers), the stronger the correlation between gold reserves and currency. Since dollars and gold were not perfect substitutes, the Bretton Woods system never worked as expected. Even after radical institutional change, history still shapes the decisions of policymakers.
    Keywords: Gold;Gold reserves;International reserves;Currencies;Banking;WP,Bretton Woods system,gold standard exposure,unit of currency,exchange rate,gold standard practice
    Date: 2019–07–24
  21. By: Li, Ye (Ohio State U); Mayer, Simon (Erasmus U Rotterdam)
    Abstract: In a dynamic model of stablecoins, we show that even with over-collateralization, a pledge of one-to-one convertibility to a reference currency is not sustainable in a stochastic environment. The distribution of states is bimodal--a fixed exchange rate can persist, but debasement happens with a positive probability and recovery is slow. When negative shocks drain the reserves that back stablecoins, debasement allows the issuer to share risk with users. Collateral requirements cannot eliminate debasement, because risk sharing is ex-post efficient under any threat of costly liquidation, whether it is due to reserve depletion or violation of regulation. Optimal stablecoin management requires a combination of strategies commonly observed in practice, such as open market operations, transaction fees or subsidies, re-pegging, and issuance and repurchase of "secondary units" that function as stablecoin issuers' equity. The implementation varies with user-network effects and is guided by Tobin's q of transaction data as productive capital.
    JEL: E41 E42 E51 E52 F31 G12 G18 G21 G31 G32 G35 L14 L86
    Date: 2020–12
  22. By: Geoffrey Parker; Georgios Petropoulos; Marshall Van Alstyne
    Abstract: Platform ecosystems rely on economies of scale, data-driven economies of scope, high-quality algorithmic systems and strong network effects that typically promote winner-take-most markets. Some platform firms have grown rapidly and their merger and acquisition strategies have been very important factors in their growth. Market dominance by big platforms has led to competition concerns that are difficult to assess with current merger policy tools. In this paper, we examine the acquisition...
    Date: 2021–01
  23. By: Akinobu Ogawa (Osaka School of International Public Policy, Osaka University); Nobuo Akai (Osaka School of International Public Policy, Osaka University)
    Abstract: This study analyzes how municipality policies to popularize the use of identify number cards, such as the service at convenience stores, affect the number of identify number cards delivered in each city in one year. The results of the analysis show that the delivery promotion policy has a certain effect.
    Keywords: Identify number card, positive externalities, policy to promote the delivering identify number cards
    JEL: H21 H51 H53 H72 H75
    Date: 2021–02
  24. By: Matthieu Bellon; Jillie Chang; Era Dabla-Norris; Salma Khalid; Frederico Lima; Enrique Rojas; Pilar Villena
    Abstract: This paper examines the impact of e-invoicing on firm tax compliance and performance using administrative tax data and quasi-experimental variation in the rollout of VAT electronic invoicing in Peru. We find that e-invoicing increases reported firm sales, purchases and value-added by over 5 percent in the first year after adoption. The impact is concentrated among smaller firms and sectors with higher rates of non-compliance, suggesting that e-invoicing enhances compliance by lowering compliance costs and strengthening deterrence. The reform’s positive effects on tax collection are hindered by shortcomings in the VAT refund mechanism in Peru, suggesting that digital tools such as e-invoicing should be complemented by other reforms to improve revenue mobilization.
    Keywords: Value-added tax;Credit;Tax administration core functions;Tax return filing compliance;Stocks;WP,firm,VAT,authority
    Date: 2019–11–01
  25. By: Bhaskar Krishnamachari; Qi Feng; Eugenio Grippo
    Abstract: One of the exciting recent developments in decentralized finance (DeFi) has been the development of decentralized cryptocurrency exchanges that can autonomously handle conversion between different cryptocurrencies. Decentralized exchange protocols such as Uniswap, Curve and other types of Automated Market Makers (AMMs) maintain a liquidity pool (LP) of two or more assets constrained to maintain at all times a mathematical relation to each other, defined by a given function or curve. Examples of such functions are the constant-sum and constant-product AMMs. Existing systems however suffer from several challenges. They require external arbitrageurs to restore the price of tokens in the pool to match the market price. Such activities can potentially drain resources from the liquidity pool. In particular, dramatic market price changes can result in low liquidity with respect to one or more of the assets and reduce the total value of the LP. We propose in this work a new approach to constructing the AMM by proposing the idea of dynamic curves. It utilizes input from a market price oracle to modify the mathematical relationship between the assets so that the pool price continuously and automatically adjusts to be identical to the market price. This approach eliminates arbitrage opportunities and, as we show through simulations, maintains liquidity in the LP for all assets and the total value of the LP over a wide range of market prices.
    Date: 2021–01
  26. By: Jonghyeon Min
    Abstract: In this study, we will study investor attention measurement using the Search Volume Index in the recent market. Since 2009, the popularity of mobile devices and the spread of the Internet have made the speed of information delivery faster and the investment information retrieval data for obtaining investment information has increased dramatically. In these circumstances, investor attention measurement using search volume data can be measured more accurately and faster than before mobile device popularization. To confirm this, we will compare the effect of measuring investor attention using search volume data before and after mobile device popularization. In addition, it is confirmed that the measured investor attention is that of retail traders, not institutional traders or professional traders, and the relationship between investor attention and short-term price pressure theory. Using SVI data provided by Google Trends, we will experiment with Russell 3000 stocks and IPO stocks and compare the results. In addition, the results of investigating the investor's interest using the search volume data from various angles through experiments such as the comparison of the results based on the inclusion of the noise ticker group, the comparison of the limitations of the existing investor attention measurement method, and the comparison of explanatory variables with existing IPO related studies. We would like to verify its practicality and significance.
    Date: 2021–01
  27. By: Andrew Clark (Department of Economics, University of Reading); Alexander Mihailov (Department of Economics, University of Reading); Michael Zargham (Vienna University of Economics and Business)
    Abstract: This paper proposes a complex dynamic systems subpopulation model for the construction and validation of a novel form of local complementary currency, namely the Grassroots Economics Foundation's Community Inclusion Currency (CIC) implemented recently in Kenya. Differently from other related work in computer science or of a legal nature, we frame our analysis in a deeper economic context, thus bridging the gap across these parallel literatures. First, we highlight the potential usefulness of the emerging blockchain-technology backed CICs, now popular in the new - and interdisciplinary - field of cryptoeconomics. Essentially, CICs can act as a local liquidity-provision institutional device in poor or isolated economic regions to increase their internal exchange and economic value added, thereby serving as a market-based mechanism to alleviate poverty, in addition to government aid and akin in its automatism and credibility to a currency board monetary regime in national economies. The ultimate goal of these CIC systems is to promote a transition toward complete inclusion and integration into the national and global economies, pulling over the communities and regions out of self-sufficiency and poverty into more advanced stages of economic development and well-being. Second, we elicit 50 heterogeneous utility types according to observed transactions behavior and build a corresponding model and simulation at a meso-economic level, which for many purposes could prove more insightful for policymakers than the usual extreme perspectives of micro and macro.
    Keywords: gender unemployment gap, demographic composition of unemployment, macroeconomic shocks, labour market institutions, monetary policy, Euro Area
    JEL: E24 E32 E52 F45 J16 J24
    Date: 2021–01–31
  28. By: Elya Kurniawati (Universitas Negeri Malang, Jl. Semarang No. 5 Malang, 65145, Malang, Indonesia Author-2-Name: Immamul Huda Al Siddiq Author-2-Workplace-Name: Universitas Negeri Malang, Jl. Semarang No. 5 Malang, 65145, Malang, Indonesia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - This study aims to find out (1) how the e-commerce utilization model before and during the pandemic, (2) the influence of the level of education on the tendency to use e-commerce (3) the marketing media used before and after the Covid-19 pandemic, and ( 4) the average income of MSME actors before and after the Covid-19 pandemic. The research method used is an explanative quantitative method, using a questionnaire, examining theories and policies related to Covid-19 and the application of e-commerce. Methodology/Technique - This study used a sample of 75 MSME actors and found that there was a significant increase in the use of e-commerce by Indonesian MSME actors during the Covid-19 pandemic. The use of online media in economic activities during the pandemic increased from 21.33% to 54.67%. Meanwhile, the education level of the MSME actors did not influence the decision to change the transaction pattern from offline to online with r score of 0.132. Finding - This means that this pandemic has changed the way of transactions in economic activity to its roots no matter how high the education level of the MSME actors is. The income of MSME actors has actually dropped dramatically during the pandemic, especially the period when the government implemented the Large-Scale Social Restrictions (PSBB) policy. Type of Paper - Empirical
    Keywords: COVID-19, E-Commerce, Social Distancing, MSME
    JEL: L81 O32
    Date: 2020–12–31
  29. By: Greg Buchak; Gregor Matvos; Tomasz Piskorski; Amit Seru
    Abstract: We study the frictions in dealer-intermediation in residential real estate through the lens of “iBuyers,” technology entrants, who purchase and sell residential real estate through online platforms. iBuyers supply liquidity to households by allowing them to avoid a lengthy sale process. They sell houses quickly and earn a 5% spread. Their prices are well explained by a simple hedonic model, consistent with their use of algorithmic pricing. iBuyers choose to intermediate in markets that are liquid and in which automated valuation models have low pricing error. These facts suggest that iBuyers’ speedy offers come at the cost of information loss concerning house attributes that are difficult to capture in an algorithm, resulting in adverse selection. We calibrate a dynamic structural search model with adverse selection to understand the economic forces underlying the tradeoffs of dealer intermediation in this market. The model reveals the central tradeoff to intermediating in residential real estate. To provide valuable liquidity service, transactions must be closed quickly. Yet, the intermediary must also be able to price houses precisely to avoid adverse selection, which is difficult to accomplish quickly. Low underlying liquidity exacerbates adverse selection. Our analysis suggests that iBuyers’ technology provides a middle ground: they can transact quickly limiting information loss. Even with this technology, intermediation is only profitable in the most liquid and easy to value houses. Therefore, iBuyers’ technology allows them to supply liquidity, but only in pockets where it is least valuable. We also find limited scope for dealer intermediation even with improved pricing technology, suggesting that underlying liquidity will be an impediment for intermediation in the future.
    JEL: G0 G2 G5 L0 R20
    Date: 2020–12
  30. By: Linda Schilling; Jesús Fernández-Villaverde; Harald Uhlig
    Abstract: A central bank digital currency, or CBDC, may provide an attractive alternative to traditional demand deposits held in private banks. When offering CBDC accounts, the central bank needs to confront classic issues of banking: conducting maturity transformation while providing liquidity to private customers who suffer “spending” shocks. We analyze these issues in a nominal version of a Diamond and Dybvig (1983) model, with an additional and exogenous price stability objective for the central bank. While the central bank can always deliver on its nominal obligations, runs can nonetheless occur, manifesting themselves either as excessive real asset liquidation or as a failure to maintain price stability. We demonstrate an impossibility result that we call the CBDC trilemma: of the three goals of efficiency, financial stability (i.e., absence of runs), and price stability, the central bank can achieve at most two.
    JEL: E58 G21
    Date: 2020–12
  31. By: Victor Couture (University of California, Berkeley); Jonathan I. Dingel (University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)); Allison Green (Princeton University); Jessie Handbury (University of Pennsylvania, The Wharton School); Kevin Williams (Yale School of Management; Yale University - Cowles Foundation)
    Abstract: We argue the revenue potential from increasing tax rates on capital gains may be substantially greater than previously understood. First, many prior studies focus primarily on short-run taxpayer responses, and so miss revenue from gains that are deferred when rates change. Second, the composition of capital gains has shifted in recent years, such that the share of gains that are highly elastic to the tax rate has likely declined. Third, focusing on capital gains tax collection may understate fiscal spillovers from decreasing the preferential tax treatment for capital gains. Fourth, additional base-broadening reforms, like eliminating stepped-up basis and making charitable giving a realization event, will decrease the elasticity of the tax base to rate changes. Overall, we do not think the prevailing assumption of many in the scorekeeping community—that raising rates to top ordinary income levels would raise little revenue—is warranted. A crude calculation illustrates that raising capital gains rates to ordinary income levels could raise $1 trillion more revenue over a decade than other estimates suggest. Given the magnitudes at stake, scorekeeping procedures employed in evaluating capital gains should be made more transparent and be the subject of external professional debate and review.
    JEL: C8 R1 R4
    Date: 2021
  32. By: Raphael Auer (BIS); Cyril Monnet (University of Bern, Study Center Gerzensee); Hyun Song Shin (BIS)
    Abstract: We explore the economics and optimal design of "permissioned" distributed ledger technology (DLT) in a credit economy. Designated validators verify transactions and update the ledger at a cost that is derived from a supermajority voting rule, thus giving rise to a public good provision game. Without giving proper incentives to validators, however, their records cannot be trusted because they cannot commit to verifying trades and they can accept bribes to incorrectly validate histories. Both frictions challenge the integrity of the ledger on which credit transactions rely. In this context, we examine the conditions under which the process of permissioned validation supports decentralized exchange as an equilibrium, and analyze the optimal design of the trade and validation mechanisms. We solve for the optimal fees, number of validators, supermajority threshold and transaction size. A stronger consensus mechanism requires higher rents be paid to validators. Our results suggest that a centralized ledger is likely to be superior, unless weaknesses in the rule of law and contract enforcement necessitate a decentralized ledger.
    Date: 2021–01
  33. By: Feingold, Ellen; Fourie, Johan; Gardner, Leigh
    Abstract: This paper uses the South African objects in the National Numismatic Collection of the Smithsonian to tell a new material history of money in South Africa. In other parts of the continent, research about the currencies in use and how these changed over time have offered a new perspective on the impact of colonialism, commercialisation, and the rise of state capacity. South Africa, and southern Africa more generally, has remained on the periphery of these debates. This paper begins to fill this gap. It shows that even in Africa’s most financially developed region, the process of establishing a stable national currency was long and halting, reflecting struggles over South Africa’s relationship with the global economy and the rise and fall of apartheid.
    Keywords: South Africa; currency; colonialism; mineral; REF Impact Fund
    JEL: N47 N17
    Date: 2021–01

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NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.