nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2021‒06‒14
thirty-six papers chosen by

  1. Central bank digital currency: the quest for minimally invasive technology By Raphael Auer; Rainer Boehme
  2. Does mining fuel bubbles? An experimental study on cryptocurrency markets By Lambrecht, Marco; Sofianos, Andis; Xu, Yilong
  3. Digital nudges as conversion enhancers in profit-oriented and non-profit oriented digital business models By Schneider, David
  4. An Exploration of First Nations Reserves and Access to Cash By Heng Chen; Walter Engert; Kim Huynh; Daneal O’Habib
  5. México | Patrones de consumo de efectivo vs. tarjeta: una aproximación Big Data By Saide Aránzazu Salazar; Jaime Oliver Huidobro; Alvaro Ortiz; Tomasa Rodrigo; Ignacio Tamarit
  6. Sustainable finance, current and future implications for banks and monetary policy: assessing COVID impacts By Ojo/Roedl, Marianne
  7. Digital work in Eastern Europe overview of trends, outcomes and policy responses By Aleksynska, Mariya.
  8. Antecedents of Customer Loyalty (CL) in the Mobile Telecommunication Companies in Cameroon By Marymagdaline E. Tarkang; Ruth N. Yunji; Simplice A. Asongu; Uju V. Alola
  9. Antecedents of Customer Loyalty (CL) in the Mobile Telecommunication Companies in Cameroon By Marymagdaline E. Tarkang; Ruth N. Yunji; Simplice A. Asongu; Uju V. Alola
  10. Money, technology and banking: what lessons can China teach the rest of the world? By Michael Chui
  11. Adoption and usage of E-grocery shopping: A context-specific UTAUT2 model By Ellen Van Droogenbroeck; Léon Van Hove
  12. Platform Mergers: Lessons from a Case in the Digital TV Market By Ivaldi, Marc; Zhang, Jiekai
  13. Global Risk and Safe Haven Currency: Copula-DCC Approach By Kumamoto, Masao; Zhuo, Juanjuan
  14. Digital Transformation of Japanese Banks By Financial System and Bank Examination Department
  15. The Economics of Platforms: A Theory Guide for Competition Policy By Jullien, Bruno; Sand-Zantman, Wilfried
  16. The emergence of Artificial Intelligence in European regions: the role of a local ICT base By Jing Xiao; Ron Boschma;
  17. Private Money and Central Bank Money as Payments Go Digital: an Update on CBDCs: a speech at the Consensus by CoinDesk 2021 Conference, Washington, D.C. (via webcast), May 24, 2021 By Lael Brainard
  18. Should card data storage with merchants, payment aggregators and payment gateways be prohibited? By Renuka Sane; Ajay Shah; Bhargavi Zaveri
  19. The Mobile Phone Technology, Gender Inclusive Education and Public Accountability in Sub-Saharan Africa By Simplice A. Asongu; Alex Adegboye; Jeremiah Ejemeyovwi; Olaoluwa Umukoro
  20. The risk of being a fallen angel and the corporate dash for cash in the midst of COVID By Acharya, Viral V.; Steffen, Sascha
  21. A PRACTICAL THEORY OF FUNGIBILITY By Shorish, Jamsheed; Stephenson, Matt; Zargham, Michael
  22. "Another Bretton Woods Reform Moment: Let Us Look Seriously at the Clearing Union" By Jan Kregel
  23. High courts and social media in Latin America By Llanos, Mariana; Tibi Weber, Cordula
  24. The Distributional Impact of the Pandemic By Hacioglu Hoke, Sinem; Känzig, Diego R; Surico, Paolo
  25. A Year of Online Classes Amid COVID-19 Pandemic: Advantages, Problems, and Suggestions of Economics Students at a Bangladeshi Public University By Shuchi, Musharrat Shabnam; Tabassum, Sayeda Chandra; Toufique, M. M. K.
  26. Who Received PPP Loans by Fintech Lenders? By Jessica Battisto; Nathan Y. Godin; Claire Kramer; Asani Sarkar
  27. Technological Change and Employment By Kauhanen, Antti
  28. Overlooking the online world: Does mismeasurement of the digital economy explain the productivity slowdown? By Alejandra Bellatin; Stephanie Houle
  29. The political reception of innovations By Jeffry Frieden; Arthur Silve
  30. The birth of new high growth enterprises: Internationalisation through new digital technologies By Teruel Carrizosa, Mercedes; Coad, Alexander; Domnick, Clemens; Flachenecker, Florian; Harasztosi, Péter; Janiri, Mario Lorenzo; Pál, Rozália
  31. Controlling Fake Reviews By Yasui, Yuta
  32. Piercing Through Opacity: Relationships and Credit Card Lending to Consumers and Small Businesses During Normal Times and the COVID-19 Crisis By Allen N. Berger; Christa H. S. Bouwman; Lars Norden; Raluca A. Roman; Gregory F. Udell; Teng Wang
  33. With a Little Help from Friends: Strategic Financing and the Crowd By Dasgupta, Sudipto; Fan, Tingting; Li, Yiwei; Xiao, Yizhou
  34. The Mobile Phone in Governance for Environmental Sustainability in Sub-Saharan Africa By Simplice A. Asongu; Rexon T. Nting
  35. A Continuous-Time Model of Financial Clearing By Sonin, Isaac; Sonin, Konstantin
  36. Linking real estate data with entrepreneurial ecosystems: Coworking spaces, funding and founding activity of start-ups By Gauger, Felix; Pfnür, Andreas; Strych, Jan-Oliver

  1. By: Raphael Auer; Rainer Boehme
    Abstract: CBDCs should let central banks provide a universal means of payment for the digital era. At the same time, such currencies must safeguard consumer privacy and maintain the two-tier financial system. We set out the economic and operational requirements for a "minimally invasive" design – one that preserves the private sector's primary role in retail payments and financial intermediation – for CBDCs and discuss the implications for the underlying technology. Developments inspired by popular cryptocurrency systems do not meet these requirements. Instead, cash is the model for CBDC design. Showing particular promise are digital banknotes that run on "intermediated" or "hybrid" CBDC architectures, supported with technology to facilitate record-keeping of direct claims on the central bank by private sector entities. Their economic design should emphasise the use of the CBDC as medium of exchange but needs to limit its appeal as a savings vehicle. In the process, a novel trade-off for central banks emerges: they can operate either a complex technical infrastructure or a complex supervisory regime. There are many ways to proceed, but all require central banks to develop substantial technological expertise.
    Keywords: central bank digital currency, CBDC, payments, cash, privacy, distributed systems
    JEL: E42 E58 G21 G28
    Date: 2021–06
  2. By: Lambrecht, Marco; Sofianos, Andis; Xu, Yilong
    Abstract: The massive price bubbles of decentralized cryptocurrencies, such as Bitcoin, have created a puzzle for economists. How can a non-revenue-generating asset exhibit such extreme price dynamics, forming multiple episodes of bubbles and crashes since its creation? The answer is not straightforward, since cryptocurrencies differ in several important aspects from other conventional assets. In this paper, we investigate how key features associated with the Proof-of-Work consensus mechanism affect pricing. In a controlled laboratory experiment, we observe that the formation of price bubbles can be causally attributed to mining. Moreover, bubbles are more pronounced if the mining capacity is centralized to a small group of individuals. Analysis of the order book data reveals that miners seem to play a crucial role in bubble formation. The results demonstrate that high price volatility is an inherent feature of cryptocurrencies based on a mining protocol, which seriously limits any prospects for such assets truly becoming a medium of exchange.
    Keywords: bubbles; cryptocurrency; financial market experiment; Bitcoin
    Date: 2021–06–09
  3. By: Schneider, David
    Abstract: The growing use of digital technologies between consumers and businesses has led to a shift of transactions from an offline context into the online world. These developments have disrupted entire industries, including music, travel, accommodation, and financial services, and created new value pools. A great extent of the value creation can be attributed to profit-oriented business models, as shown by the growing valuation of large platform operators (e.g., Airbnb and Uber). At the same time, significant value is unlocked in non-profit oriented business models such as in the context of non-commercial online sharing economy platforms or the digital government space. However, the online space also brought new challenges to digital platform operators, such as greater rivalry resulting from increasing transparency. As the Internet has largely removed the barriers to information access, website visitors have been enabled to shop around and gather plenty of information before committing to a binding transaction. Therefore, converting visitors to actual customers or users remains a critical task, both for profit-oriented and non-profit oriented digital business model operators, as they need to ensure value is truly captured. Previous research in the Information Systems (IS) space around conversion rate optimization in digital business models has primarily focused on the concept of perceived benefits and associated costs when engaging in a particular transaction. While benefits are often related to the product or service, costs are frequently associated with the lack of trust in the digital platform or website operator due to potential misuse of personal information. In addition to the cost-benefit perspective, website design features have been shown to influence user behavior in both profit-oriented and non-profit oriented digital business models. While the intention of certain design feature elements such as banners or ads is directly visible to users, some design elements are aimed at influencing customer behavior inconspicuously – without the users' notice. The use of visual user interface elements to subtly influence consumer behavior in digital decision environments by leveraging psychological biases are called digital nudges. The literature on digital nudging shows promising results in driving conversion rates in digital business models. However, the use of digital nudges has been mainly limited to research in profit-oriented digital business models. At the same time, traditional, non-digital nudges have been mainly researched in the non-profit oriented context, especially in the government space, which simultaneously represents the origin of nudging theory. By assessing digital nudges in both non-profit and profit-oriented digital business models, three studies attempt to close this gap. The first study investigates the effect of prosociality nudges on conversion rates on a fictional non-profit oriented online sharing economy platform. Results show that while prosociality increases conversion likelihood, excessive prosociality may also reduce the transaction likelihood. The second study shows how two separately framed communication arguments – one promotion-focus argument conveying convenience and a prevention-focus argument aiming to reduce privacy concerns – increase online verification conversion rate in a fictional profit-oriented digital carsharing platform if data supports the claims. While the prevention-focus claim is stronger than the promotion-focus claim if data is added, the prevention-focus claim's conversion rate without data is weaker than no claim. The third study is positioned in the non-profit oriented e-government space, leveraging social proof cues and default options as nudges to increase the adoption rate of electronic identification (eID). Both nudges increase eID adoption, but default options are a double-edged sword. They simultaneously fuel privacy concerns towards the government, which attenuates the effect of the default option on eID adoption. These concerns can be mitigated by adding social proof cues. This thesis contributes to our understanding of how digital nudges may be applied to increase conversion rates within profit-oriented and non-profit oriented digital business models. Specifically, this study demonstrates that digital nudges designed to leverage stability biases and perception biases may be used to increase conversion rates in both profit-oriented and non-profit oriented digital business models. The aforementioned first and third study have contributed to a better understanding of how digital nudges may enhance user conversion in non-profit oriented organizations by leveraging the emotional bias and status quo bias to increase conversion. These studies also provided insights on the combined effect of social proof cues and default options on conversion rates: While default options may be used to increase conversion rates, they are ambidextrous as they increase privacy concerns. However, this can be mitigated by adding social proof cues. The second study contributed to a better understanding of how framing and loss aversion can be leveraged to increase conversion rate in profit-oriented business models. Additionally, this study provided some insights into combining theory on communication arguments with third-party assurance seals as supporting data to enhance the effect of nudges further. From a practical point of view, digital business model operators may leverage these findings to redesign their website by employing digital nudges to drive conversion rates and thus increase profitability.
    Date: 2021
  4. By: Heng Chen; Walter Engert; Kim Huynh; Daneal O’Habib
    Abstract: Providing bank notes is one of the Bank of Canada’s core functions. The Bank is therefore interested in whether cash is adequately distributed across society, and this also influences the Bank’s thinking on issuing a central bank digital currency. We provide a perspective on these issues by exploring access of First Nations reserves to cash. To do so, we measure the distance between the 637 reserve band offices in Canada and their closest cash sources. In this study, these cash sources are branches of financial institutions (FIs), automated bank machines (ABMs) owned by FIs, and white label ABMs. We measure the distance between band offices and cash sources by geographical distance (“as the crow flies”) and by travel distance (e.g., road routes). We also provide some information on access to financial services more generally and set out questions for future research.
    Keywords: Bank notes; Digital currencies and fintech; Financial institutions; Financial services; Payment clearing and settlement systems
    JEL: E41 E42 E5 G21
  5. By: Saide Aránzazu Salazar; Jaime Oliver Huidobro; Alvaro Ortiz; Tomasa Rodrigo; Ignacio Tamarit
    Abstract: El documento propone una nueva metodología que combina datos de operaciones con tarjeta e información de operaciones en efectivo en supermercados. Se estudian los cambios en patrones de consumo en relación con las variaciones de ingresos, que incluye la evolución del consumo de bienes y el uso de distintos canales de pago. This paper proposes a novel methodology combining high frequency card transaction data and point-of-sale (POS) data from cash operations registered at convenience stores to study changes in consumption patterns relative to variations in income, including changes in the items consumed and the payment channel.
    Keywords: e-Payments, Pagos electrónicos, cash, efectivo, Big Data, Big Data, machine learning, aprendizaje automático, consumption patterns, patrones de consumo, Mexico, México, Global, Global, Analysis with Big Data, Análisis con Big Data, Working Papers, Documento de Trabajo
    JEL: C32 D12 O17 O54
    Date: 2021–05
  6. By: Ojo/Roedl, Marianne
    Abstract: The implications of COVID developments for monetary policy will certainly extend beyond the increased use of digital platforms and payments. The current environment is also focused on smart green techniques and green initiatives aimed at promoting a transition to a net zero based carbon emissions economy. During the onset of the pandemic, it was initially thought that carbon emissions would fall drastically – given the impact of the pandemic, not only on the airlines industry, but also as a result of “Stay at Home” measures imposed by jurisdictions, which even made it illegal to drive to certain places, where purposes for doing so were unjustified. However, the pandemic has also witnessed unprecedented levels in digital subscriptions, online sales and marketing – also fueled through digital payments and the use of digital platforms and distributed ledger technologies in facilitating cashless payments – cash, namely bank notes and coins, also being considered to be a medium of COVID transmission. Coupled with attributes such speed, convenience and ease, the need for financial inclusion has also become an objective in facilitating the era of innovative digital means of payments. As well as considering the current implications of measures that have been instigated to address the impacts of the pandemic, drawing from past and current lessons from selected jurisdictions, this paper also considers why the transition to a net zero carbon economy may prove more challenging than may first appear. However, jurisdictional differences and historical developments will play a part in determining how sustainable certain implemented policies and measures are – as well as in facilitating a transition to normality.
    Keywords: EU Green Deal; sustainable finance, interest rates; inflation; pandemic asset purchase program (PEPP); APP asset purchase program; longer term financing operations; transition risks; financial stability; CBDCs
    JEL: E5 G21 G28 G3 G38 K2
    Date: 2021–06–02
  7. By: Aleksynska, Mariya.
    Abstract: This paper documents the emergence and growth of digital labour markets in Eastern Europe. It shows that the development of two types of digital work – online work through online labour platforms and offline work mediated by mobile apps – have a different history, root causes and dynamics. While both are enabled by digital technologies, each attracts a different worker profile and results in different outcomes for work- ers. The paper also reviews policy responses to digital work in three areas: bringing digital work under the scope of existing regulations; ensuring fair competition with workers in traditional forms of employment; and improving formalization and better tax compliance of digital workers. It concludes by discussing how low scope for organizing digital workers, poor law enforcement and proliferation of new modes of digital work remain key obstacles for effective regulation.
    Date: 2021
  8. By: Marymagdaline E. Tarkang (Istanbul Gelisim University, Istanbul, Turkey); Ruth N. Yunji (Eastern Mediterranean University, North Cyprus); Simplice A. Asongu (Yaoundé, Cameroon); Uju V. Alola (Istanbul Gelisim University, Istanbul, Turkey)
    Abstract: The mobile telecommunication (telecom) sector has become the basic source of information now-a-days especially in Cameroon. It is used to transfer and deliver information through voice, video, data, graphics, and more at perpetually increasing speeds. The quality of mobile services does not only impact the attraction of new customers but also to maintain the existing ones. The study uses relationship marketing theory and a quantitative and cross-sectional method with 200 respondents. Information was obtained from users of MTN and Orange mobile telecommunication networks. The analyses were done using SPSS version 20. Tangibility, reliability, and assurance dimensions of staff service quality showed a positive relationship with customer loyalty in mobile telecom companies in Cameroon. The findings also highlight the influence of service quality dimensions on customer loyalty in the mobile telecom companies of the country. This study complements to extant literature by examining the influence of the five service quality dimensions; tangibility, reliability, assurance, responsiveness, and empathy on consumer loyalty or retention in the mobile telecommunication companies in Cameroon.
    Keywords: Tangibility, Reliability, ICT, Empathy, Responsiveness, Assurance, customer loyalty
    Date: 2021–01
  9. By: Marymagdaline E. Tarkang (Istanbul Gelisim University, Istanbul, Turkey); Ruth N. Yunji (Eastern Mediterranean University, Turkey); Simplice A. Asongu (Yaoundé, Cameroon); Uju V. Alola (Istanbul Gelisim University, Istanbul, Turkey)
    Abstract: The mobile telecommunication (telecom) sector has become the basic source of information now-a-days especially in Cameroon. It is used to transfer and deliver information through voice, video, data, graphics, and more at perpetually increasing speeds. The quality of mobile services does not only impact the attraction of new customers but also to maintain the existing ones. The study uses relationship marketing theory and a quantitative and cross-sectional method with 200 respondents. Information was obtained from users of MTN and Orange mobile telecommunication networks. The analyses were done using SPSS version 20. Tangibility, reliability, and assurance dimensions of staff service quality showed a positive relationship with customer loyalty in mobile telecom companies in Cameroon. The findings also highlight the influence of service quality dimensions on customer loyalty in the mobile telecom companies of the country. This study complements to extant literature by examining the influence of the five service quality dimensions; tangibility, reliability, assurance, responsiveness, and empathy on consumer loyalty or retention in the mobile telecommunication companies in Cameroon.
    Keywords: Tangibility, Reliability, ICT, Empathy, Responsiveness, Assurance, customer loyalty
    Date: 2021–01
  10. By: Michael Chui
    Abstract: Technology companies entering the financial services industry have become a global phenomenon over the past decade. This trend is most remarkable in China where two large technology firms (BigTechs) have emerged as important market players, especially in payment services. This paper examines the factors driving this development and whether the Chinese experience could be applied elsewhere. Several lessons emerge: first, like any company in a network industry, it is important to build and maintain a large user base and that is the key factor behind BigTechs' expansion into the financial industry. On this basis, these BigTechs can be seen as "accidental financiers" rather than "aggressive invaders". Second, these firms are cautious in offering higher-risk financial services as investment losses could lead to an exodus of customers. Third, Chinese authorities' regulatory tolerance during the early stage has been a key supporting factor and helped fostering innovation benefits. But that was balanced by the implementation of capital and liquidity rules to keep BigTechs from "excessive" growth, mis-selling of financial products and posing systemic risks. Fourth, initial conditions and government support matter. The rapid growth has benefitted from China's large population, the availability of low-cost mobile handsets and heavy investment by the government on mobile communication infrastructure. These may not be easily be replicated elsewhere. Last, BigTechs' overseas expansion may require policy coordination between home and host authorities to keep track of emerging risks.
    Keywords: BigTechs, banking and finance
    JEL: D85 E41 E42
    Date: 2021–06
  11. By: Ellen Van Droogenbroeck; Léon Van Hove
    Abstract: In order to determine how sustainable online grocery shopping is as a practice, it is crucial to have an in-depth understanding of its drivers. This paper therefore validates the Unified Theory of Acceptance and Use of Technology (UTAUT2) in the context of e-grocery and enriches it with five constructs. We exploit a self-administered survey among 560 customers of two Belgian supermarkets and test the model by means of hierarchical multiple regression analysis. We do so not only for the full sample, but also for users and non-users separately. For the full sample, four of the five proposed context-specific constructs—namely, perceived risk, perceived time pressure, perceived in-store shopping enjoyment, and innovativeness—help better explain the intention to adopt or continue to use e-grocery services. In the subsamples, only perceived time pressure and innovativeness add explanatory power, and this only for non-users. In other words, the additional constructs primarily help discriminate between users and non-users. In addition, while the extended model outperforms the original UTAUT2 model for all three samples, the added value of the extended model does not so much lie in a higher explained variance, but rather in a more correct identification of the drivers of BI.
    Keywords: Adoption; E-grocery shopping; Habit; Perceived time pressure; UTAUT2
    Date: 2021–04
  12. By: Ivaldi, Marc; Zhang, Jiekai
    Abstract: This paper contributes to the analysis of mergers in two-sided markets, notably those in which a platform provides its service for free on one side but obtains all its revenues from the other, as in the digital TV industry. Specifically, we assess a decision of the French competition authority which approved the merger of the broadcasting services of the TV channels involved but imposed a behavioral remedy prohibiting the merger of their respective advertising sales services. To do so, we build a structural model allowing for multi-homing of advertisers and, using a comprehensive dataset, we estimate the demand of viewers and advertisers. Our evaluation provides evidence that the remedy has been ineffective at limiting the increase in prices and amounts of advertising, due to the cross-side externalities between viewers and advertisers. Without resulting in significant positive effects on the viewers' surplus, the remedy has also drastically increased the advertisers' total cost. Nevertheless, the remedy has benefited the competitors of the merging channels. The main lesson of our analysis is that, in the process of designing competition or regulatory policy for two-sided markets, ignoring the interaction between the two sides of platforms can result in unexpected outcomes.
    Keywords: advertising; competition policy; platform merger; TV market; two-sided market
    JEL: K21 L10 L40 L82 M37
    Date: 2020–06
  13. By: Kumamoto, Masao; Zhuo, Juanjuan
    Abstract: In this paper, we employ the Copula-Dynamic Conditional Correlation approach to investigate the safe-haven currency status of eight currencies as well as gold and Bitcoin against the main stock markets. Based on the properties of the estimated dynamic conditional correlations, we classify the currencies into a diversifier, a hedge and a safe haven currency. We also employ the threshold approach to investigate whether market uncertainty measured by the VIX would have significant effects on the estimated dynamic conditional correlation. This analysis is closely related to the study of contagion. We find that the CHF and gold are the strong hedges against the U.S. stock market except for the European sovereign crisis period, and the JPY and Bitcoin have hedge and /or safe currency status. We also find that the degrees of the role of Bitcoin as a hedge currency, and roles of the JPY and gold as a hedge and/or safe haven currency are not affected by the increase in market uncertainty, while that of the CHF as a hedge currency would be weakened as market uncertainty increases.
    Keywords: Safe haven currency, Bitcoin, Contagion, Copula-DCC, Threshold
    JEL: F31 G15
    Date: 2021–06–03
  14. By: Financial System and Bank Examination Department (Bank of Japan)
    Abstract: With the rapid development of digital technology over the past few years, an increasing number of companies and governments around the world have taken steps toward "digital transformation (DX)." DX refers to drastically rebuilding management and business processes by adopting digital technology, which leads to improved management efficiency and the provision of higher value-added services. DX first took place in the non-financial sector, but it has also been expanding rapidly in the financial sector. Furthermore, DX is gradually accelerating due to increased needs for virtual services owing to the spread of COVID-19. This paper summarizes the trends and implications of Japanese banks' DX.
  15. By: Jullien, Bruno; Sand-Zantman, Wilfried
    Abstract: We propose an analysis of platform competition based on the academic literature with a view toward competition policy. First, we discuss to which extent competition can emerge in digital markets and show which forms it can take. In particular, we underline the role of dynamics, but also of platform differentiation, consumers multihoming and beliefs to allow competition in platform markets. Second, we analyze competition policy issues and discuss how rules designed for standard markets can perform in two-sided markets. We show that multi-sided externalities create new opportunities for anti-competitive conducts, often related to pricing and contractual imperfections.
    Keywords: competition policy; networks; platforms; two-sided markets
    JEL: D82 L13 L41 L86
    Date: 2020–07
  16. By: Jing Xiao; Ron Boschma;
    Abstract: The purpose of this study is to investigate how a regional knowledge base in Information and Communication Technologies (ICTs) influences the emergence of AI technologies in European regions. Replying on patent data and studying the knowledge production of AI technologies in 233 European regions in the period of 1994 to 2017, our study reveals three results. First, ICTs are a major knowledge source of AI technologies and their importance has been increasing over time. Second, a regional knowledge base in ICTs is highly relevant for regions to engage in AI inventing. Third, the effects of regional knowledge base of ICTs are stronger for regions that recently caught up in AI inventing. Our findings suggest that ICTs play a critically enabling role for regions to diversify into AI technologies, especially in catching-up regions.
    Keywords: Artificial intelligence (AI), regional diversification, Information and Communications Technologies (ICTs), technological relatedness, General Purpose Technologies (GPTs), Europe
    JEL: O33 R11 O31
    Date: 2021–05
  17. By: Lael Brainard
    Date: 2021–05–24
  18. By: Renuka Sane (NIPFP); Ajay Shah (xKDR Forum and Jindal Global University); Bhargavi Zaveri (xKDR Forum)
    Abstract: In March 2020, the Reserve Bank of India's guidelines on Payment Aggregators and Payment Gateways prohibited merchants from storing data on cards used by customers. This paper argues that a total prohibition on card data storage is problematic as it affects the ease of transactions for consumers, and effectively tilts consumer preference towards other payment instruments. This runs the risk of technological choices in the industry being made or substantially shaped by the regulator. The documents released lack a cost-benefit analysis of this prohibition and do not demonstrate that the chosen intervention is the best one. This raises concerns in the light of emerging Indian jurisprudence on the standards of regulatory governance to be met by statutory regulatory agencies. We show alternative approaches to address concerns relating data breaches of card information stored by consumers on websites. These include better security standards, tokenisation, and liability frameworks.
    JEL: H83 K22 K23
    Date: 2021–05
  19. By: Simplice A. Asongu (Yaounde, Cameroon); Alex Adegboye (Covenant University, Ogun State, Ota, Nigeria); Jeremiah Ejemeyovwi (Covenant University, Ogun State, Ota, Nigeria); Olaoluwa Umukoro (Covenant University, Ogun State, Ota, Nigeria)
    Abstract: This study assesses the relevance of mobile phone technology in complementing gender inclusive education (i.e. primary, secondary and tertiary) to promote public accountability (i.e. involving horizontal, vertical and diagonal accountability dynamics). The study utilizes the generalized method of moments (GMM) technique to establish the empirical evidence based on 48 Sub-Saharan African countries for the period 2005-2018. The following findings are documented from the linkages between mobile phone technology, inclusive education and public accountability. First, the interactions between mobile phone technology and inclusive education promote public accountability. Second, with regard to net effects, while unexpected negative signs are established, the corresponding positive interactive effects indicate that enhancing the penetration of mobile phone technology beyond some critical thresholds ensures positive net effects. Hence, policy makers should ensure that mobile phone technology penetration exceeds the established thresholds in order for gender inclusive education to positively affect public accountability.
    Keywords: Mobile phone technology, educational quality, public accountability, Africa
    Date: 2021–01
  20. By: Acharya, Viral V.; Steffen, Sascha
    Abstract: Data on firm-loan-level daily credit line drawdowns in the United States reveals a corporate "dash for cash" induced by COVID-19. In the first phase of extreme precaution and heightened aggregate risk, all firms drew down bank credit lines and raised cash levels. In the second phase following the adoption of stabilization policies, only the highest-rated firms switched to capital markets to raise cash. Consistent with the risk of becoming a fallen angel, the lowest-quality BBB-rated firms behaved more similarly to non-investment grade firms. The observed corporate behavior reveals the significant impact of credit risk on corporate cash holdings.
    Keywords: Bank lines of credit; cash holdings; liquidity; liquidity risk; Pandemic
    JEL: G01 G14 G32 G35
    Date: 2020–07
  21. By: Shorish, Jamsheed; Stephenson, Matt; Zargham, Michael
    Abstract: We formalize 'degrees of fungibility' by differentiating goods according to both their underlying attributes and the perceived value and/or usefulness of those attributes to a value assessor. This allows us to distinguish between goods that appear to be 'exactly the same' from those goods that appear to be 'nearly the same'. Such a distinction is of particular importance in the design space of digital goods, which may exist both natively in the digital space and as surrogates, i.e. as digital representations of physical goods. We provide motivating examples where digital objects are too fungible for certain desired uses, and proceed to develop a formal framework under which degrees of fungibility can be defined and characterized. We close by bridging this framework to applications in machine learning and market design.
    Keywords: Fungibility, commodity, non-fungible tokens, NFTs
    Date: 2101–05–27
  22. By: Jan Kregel
    Abstract: This policy brief explores a route to remaking the international financial system that would avoid the contradictions inherent in some of the prevailing reform proposals currently under discussion. Senior Scholar Jan Kregel argues that the willingness of central banks to consider electronic currency provides an opening to reconsider a truly innovative reform of the international financial system, and one that is more appropriate to a digital monetary world: John Maynard Keynes's original clearing union proposal. Kregel investigates whether such a clearing system could be built up from an already-existing initiative that has emerged in the private sector. He analyzes the operations of a private, cross-border payment system that could serve as a real-world blueprint for a more politically palatable equivalent of Keynes's international clearing union.
    Date: 2021–02
  23. By: Llanos, Mariana; Tibi Weber, Cordula
    Abstract: This article presents the first comparative evaluation of the social media presence of 17 Latin American high courts. We explore the intensity with which they use Twitter, Facebook, and YouTube, as well as the level of influence that each court has developed on these platforms. The resulting classification of courts shows how their performances differ: the most influential courts are not necessarily the most active; rather, they make a differentiated use of social media. The least influential courts show great dispersion around their respective levels of activity. Additionally, we present a preliminarily evaluation of the relationship between the level of trust in the judiciaries and the courts' presence on social media. We see that courts with higher levels of distrust are moderately more active and tend to have less influence. Two motivations could explain the court behaviour in social media: the pursuit of strategic self-promotion, and an ideal of institutional transparency.
    Keywords: constitutional courts,supreme courts,institutional legitimacy,social media,Latin America
    Date: 2021
  24. By: Hacioglu Hoke, Sinem; Känzig, Diego R; Surico, Paolo
    Abstract: The top quartile of the income distribution accounts for almost half of the pandemic-related decline in aggregate consumption, with expenditure for this group falling much more than income. In contrast, the bottom quartile of the income distribution has seen the smallest spending cuts and the largest earnings drop but their total incomes have fallen by much less because of the increase in government benefits. The decline in consumers' spending preceded the introduction of the lockdown, whose partial lifting has triggered a stronger recovery in sectors with a lower contract rate. The largest spending contractions are concentrated in the most affluent regions. These conclusions are based on detailed high-frequency transaction data on spending, earnings and income from a large Fintech company in the United Kingdom.
    Keywords: benefits; Earnings; Heterogeneity; Income; Pandemic; spending
    JEL: D12 E21 G51
    Date: 2020–07
  25. By: Shuchi, Musharrat Shabnam; Tabassum, Sayeda Chandra; Toufique, M. M. K.
    Abstract: Though there have been works highlighting the advantages and disadvantages of online learning, no study focused on university-level economics students. None of the studies explored students' opinions about improving the quality and effectiveness of online classes. Many used questionable samples, closed-ended questions, and all those researches were carried out at the beginning of online classes. In this paper, we overcome these limitations of earlier studies. Using a convenience sampling technique and open-ended questions, we collect data from 154 university-level economics students after being exposed to the online class for a year. Some advantages of online classes are: students can do classes from home without being exposed to health risks, easily accessible, flexible class schedule, students remained connected with the study, it saves costs, reduce the likelihood of semester loss, easy to understand, less stressful, and learning new technologies. Major problems from students' perspectives include network problems, difficulties in understanding the topic, unsuitable for mathematical courses, concentration problem, class not interactive, financial constraint, adverse health impacts, device issues, power outages, unfamiliarity with digital technology, internet problem, and unfixed class-schedule. Disadvantages outnumbered advantages. Students made several suggestions to improve the quality and effectiveness of online classes. Some of the vital suggestions are: using state-of-the-art digital tools, recording and uploading lectures, resolving internet issues, holding classes regularly, higher efforts to make the topics easier, resolving network issues, lowering class duration, institutional support, implementing a fixed class schedule, and introducing online evaluation system.
    Keywords: COVID-19,online learning,pandemic,online education,Bangladesh,students' perceptions,higher education,distance learning,online classes
    JEL: I18 I21 I23 I28
    Date: 2021
  26. By: Jessica Battisto; Nathan Y. Godin; Claire Kramer; Asani Sarkar
    Abstract: Small businesses not only account for 47 percent of U.S employment but also provide a pathway to success for minorities and women. During the coronavirus pandemic, these small businesses—especially those owned by minorities—were hard hit as consumers reduced spending disproportionately on services that require in-person physical interaction, such as hotels and restaurants. In response, the U.S. government launched the Paycheck Protection Program (PPP) to provide guaranteed and potentially forgivable small business loans. In this post, we examine financial technology (fintech) lenders participating in the PPP and find that, while disbursing only a small share of total loan amounts, they provide important support to minority business owners, who have in the past been underserved by the traditional banking industry.
    Keywords: small business loans; inequality; Paycheck Protection Program (PPP); Fintech
    JEL: E51 G21 I3 I1
    Date: 2021–05–27
  27. By: Kauhanen, Antti
    Abstract: Abstract In order to understand the employment effects of technological progress, it is useful to separate three types of technologies: 1) automation technologies, 2) technologies that create new tasks, and 3) capital- or labor-augmenting technologies. These different types of technological advances affect employment very differently and through different channels. Automation technologies may either decrease or increase employment, whereas the other types of technological progress unambiguously increase employment. Empirical estimates of the employment effects of automation are very different in different countries. The results from United States show negative employment effects, whereas German and French studies show the opposite. It is likely that the employment effects of automation technologies depend on the role of international trade, labor market institutions and political choices. However, there is still little research on these topics. There is even less research on how the direction of technological change (automation technologies vs. technologies creating new tasks) is determined and how it can be affected by policy.
    Keywords: Technological change, Employment, Robots, Artificial intelligence
    JEL: O33 J21 J23 J24
    Date: 2021–06–07
  28. By: Alejandra Bellatin; Stephanie Houle
    Abstract: Since the mid-2000s, labour productivity has slowed down in Canada despite enormous technological advances that were expected to improve it. This note investigates whether mismeasurement of the digital economy can explain this paradox.
    Keywords: Productivity
    JEL: E01 L86 O33 O51
    Date: 2021–05
  29. By: Jeffry Frieden; Arthur Silve
    Abstract: Why do some societies embrace innovative technologies, policies, and ideas, while others are slow to adopt, or even resist, them? We focus on features of an innovation that are expected to affect the incumbent elite's economic activities, and hence the elite's reaction. The elite can choose whether to appropriate the innovation for itself; encourage its adoption; tax, regulate, or limit or block it. Six features of the innovation affect the elite response: i) whether it is easy to replicate; ii) whether it complements or competes with the elite's sources of income; iii) whether its impact is broad or narrow; iv) whether it is location-dependent, and v) concealable; vi) whether it requires large fixed costs. Some of these factors have been considered in other work; here we assess them together. We provide illustrative evidence of the relevance and generality of the model to understand the fate of a variety of innovations.
    Keywords: : innovation, regulation, rent-seeking
    JEL: D72 L50 O30
    Date: 2021
  30. By: Teruel Carrizosa, Mercedes; Coad, Alexander; Domnick, Clemens; Flachenecker, Florian; Harasztosi, Péter; Janiri, Mario Lorenzo; Pál, Rozália
    Abstract: This paper explores the relationship between new digital technologies, internationalisation activity and its impact on High Growth Enterprises (HGEs), using the EIB Group Survey of Investment and Investment Finance and ORBIS data for 27 EU Member States and the United Kingdom. After controlling for sample selection bias, our results suggest that being a HGE is positively associated with the probability that a firm conducts international activities, particularly FDI. Conversely, the internationalisation process seems to trigger strong subsequent firm-growth for FDI. Furthermore, we show evidence on the positive association between firms that are internationalised and those adopting new digital technologies. The adoption of new digital technologies is indirectly related to the status of being a HGE via internationalisation activity in the current period. Our results highlight the complex influence of exporting and FDI on the capacity to become a HGE and the role of new digital technologies in this process.
    Keywords: Digital technologies,export,FDI,HGE,internationalisation
    JEL: F14 L21 O31
    Date: 2021
  31. By: Yasui, Yuta
    Abstract: This paper theoretically analyzes fake reviews on a platform market using models where a seller creates fake reviews through incentivized transactions, and its sales depend on its rating based on a review history. The platform can control the incentive for fake reviews by changing the parameters of the rating system, such as weights placed on old and new reviews and its filtering policy. At equilibrium, the number of fake reviews increases as quality increases but decreases as reputation improves. Since fake reviews have a positive relationship with a product’s underlying quality, rational consumers find a rating more informative when fake reviews exist, while credulous consumers suffer from a bias caused by boosted reputation. A stringent filtering policy can decrease the expected amount of fake reviews and the bias of credulous consumers, but at the same time, it can decrease the informativeness of a rating system for rational consumers. In terms of the weight placed on the review history, rational consumers benefit from higher weights on past reviews than from optimal weights without fake reviews.
    Keywords: fake review, reputation, rating design
    JEL: D49 D82 L51 M37
    Date: 2021–05–14
  32. By: Allen N. Berger; Christa H. S. Bouwman; Lars Norden; Raluca A. Roman; Gregory F. Udell; Teng Wang
    Abstract: We investigate bank relationships in a rarely considered context – consumer and small business credit cards. Using over one million accounts, we find during normal times, consumer relationship customers enjoy relatively favorable credit terms, consistent with the bright side of relationships, while the dark side dominates for small businesses. During the COVID-19 crisis, both groups benefit, reflecting intertemporal smoothing, with more benefits flowing to safer relationship customers. Conventional banking relationships benefit consumers more than credit card relationships, with mixed findings for small businesses. Important identification issues are addressed. The Coronavirus Aid, Relief, and Economic Security (CARES) Act consumer-delinquency reporting impediments reduce the informational value of consumer credit scores, penalizing safer borrowers.
    Keywords: Credit cards; household finance; consumers; small businesses; relationship lending; banks
    JEL: D12 G01 G20 G28
    Date: 2021–05–27
  33. By: Dasgupta, Sudipto; Fan, Tingting; Li, Yiwei; Xiao, Yizhou
    Abstract: Based on a crowdfunding platform and social media account login data, we study the information role of financing from connected individuals (e.g., family and friends) of entrepreneurs. While financing from connected individuals is generally considered as a signal of high-quality projects, our results suggest that this might be a signal of funding performance manipulation. Entrepreneurs with moderate early funding performance strategically solicit investments from friends to encourage naïve investors to herd. Sophisticated investors discern manipulation and are less likely to invest. Manipulation exists even when sophisticated investors have significant market power and projects with manipulation deliver poorer funding performance.
    Date: 2020–07
  34. By: Simplice A. Asongu (Yaounde, Cameroon); Rexon T. Nting (University of Wales, London, UK)
    Abstract: In this study, we assess how the mobile phone can be leveraged upon to improve the role of governance in environmental sustainability in 44 Sub-Saharan African countries. The Generalised Method of Moments is used to establish policy thresholds. A threshold is a critical mass or level of mobile phone penetration at which the net effect of governance on Carbon dioxide (CO2) emissions changes from positive to negative. Mobile phone penetration thresholds associated with negative conditional effects are: 36 (per 100 people) for political stability/no violence; 130 (per 100 people) for regulation quality; 146.66 (per 100 people) for government effectiveness; 65 (per 100 people) for corruption-control and 130 (per 100 people) for the rule of law. Practical and theoretical implications are discussed. The study provides thresholds of mobile phone penetration that are critical in complementing governance dynamics to reduce CO2 emissions.
    Keywords: CO2 emissions; ICT; Economic development; Africa
    JEL: C52 O38 O40 O55 P37
    Date: 2021–01
  35. By: Sonin, Isaac; Sonin, Konstantin
    Abstract: We present a simple continuous-time model of clearing in financial networks. Financial firms are represented as ``tanks'' filled with fluid (money), flowing in and out. Once the ``pipes'' connecting the ``tanks'' are open, the system reaches the clearing payment vector in finite time. This approach provides a simple recursive solution to a classical static model of financial clearing in bankruptcy, and suggests a practical payment mechanism. With sufficient resources, a system of mutual obligations can be restructured into an equivalent system that has a cascade structure: there is a group of banks that paid off their debts, another group that owes money only to banks in the first group, and so on. We demonstrate how the machinery of Markov chains can be used to analyze evolution of a deterministic dynamical system.
    Keywords: clearing vector; continuous time; Financial Networks; Markov chains
    JEL: G21 G33
    Date: 2020–07
  36. By: Gauger, Felix; Pfnür, Andreas; Strych, Jan-Oliver
    Date: 2021–05–29

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.