nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2021‒11‒01
nineteen papers chosen by
Bernardo Bátiz-Lazo
Northumbria University

  1. Pecunia olet. Cash usage and the underground economy By Michele Giammatteo; Stefano Iezzi; Roberta Zizza
  2. Fake Reviews and Naive Consumers By Boris Knapp
  3. Forecasting Inflation and Output Growth with Credit-Card-Augmented Divisia Monetary Aggregates By William Barnett; Sohee Park
  4. Monetary and Financial Perspectives on Retail CBDC in the Thai Context By Thitima Chucherd; Chanokkarn Mek-yong; Nalin Nookhwun; Passawuth Nuntnarumit; Natta Piyakarnchana; Suparit Suwanik
  5. The Sharing Economy in the Netherlands: Grounding Public Values in Shared Mobility and Gig Work Platforms By Waal, Martijn; Arets, Martijn
  6. A DeFi Bank Run: Iron Finance, IRON Stablecoin, and the Fall of TITAN By Kanis Saengchote
  7. Consumer Payment Choice and the Heterogeneous Impact of India’s Demonetization By Ayushi Bajaj; Nikhil Damodaran
  8. Where Do DeFi Stablecoins Go? A Closer Look at What DeFi Composability Really Means By Kanis Saengchote
  9. Blockchain Analysis of the Bitcoin Market By Igor Makarov; Antoinette Schoar
  10. A Bibliography of Free Banking Scholarship (2021) By Qiao, Elizabeth
  11. The impact of Covid-19 on international tourism flows to Italy: evidence from mobile phone data By Valerio Della Corte; Claudio Doria; Giacomo Oddo
  12. Regulating Big Tech and Non-bank Financial Services in the Digital Era By Thammarak Moenjak; Veerathai Santiprabhob
  13. The impact of digitalization on poverty alleviation in Africa By Kohnert, Dirk
  14. Using sentiment analysis in tourism research: A systematic, bibliometric, and integrative review By Cristina Franciele; Thays Christina Domareski Ruiz
  15. The Impact of Fake Reviews on Reputation Systems and Efficiency By Krügel, Jan Philipp; Paetzel, Fabian
  16. Naïve Consumers and Financial Mistakes By Exler, Florian; Hansak, Alexander
  17. Shaping digitalization among German tourism service providers: Processes and implications By Hannes Thees; Elina Störmann; Franziska Thiele; Natalie Olbrich
  18. Do myriad e-channels always create value for customers? A dynamic analysis of the perceived value of a digital information product during the usage phase By Rémi Mencarelli; Arnaud Rivière; Cindy Lombart
  19. Retail CBDC purposes and risk transfers to the central bank By Romain Baeriswyl; Samuel Reynard; Alexandre Swoboda

  1. By: Michele Giammatteo (Bank of Italy); Stefano Iezzi (Bank of Italy); Roberta Zizza (Bank of Italy)
    Abstract: This paper explores the role of cash usage in feeding the underground economy by using a unique dataset that combines, at province level, official estimates of Italian firms’ underreporting with data on cash transactions drawn from the aggregate anti-money laundering reports filed to the Italian Financial Intelligence Unit (UIF) by banks. In order to derive causal evidence, we apply two different econometric strategies: an instrumental variable approach and a difference-in-difference approach, which exploits the change in the maximum threshold for cash transactions introduced in 2016, thereby providing a measure of the effect of such policy on tax evasion. We find that an increase in cash usage translates, other things being equal, into a higher level of underreporting by firms, and that raising the cash threshold in 2016 – a measure motivated by the objective of boosting spending – had the side effect of leading to a larger underground economy.
    Keywords: shadow economy, tax evasion, cash threshold, bank branches, ATM, cashless payments
    JEL: O17 H26 E26 E42
    Date: 2021–10
  2. By: Boris Knapp
    Abstract: User-generated reviews like those found on Amazon, Yelp, and similar platforms have become an important source of information for most consumers nowadays. It is therefore tempting for firms to manipulate reviews in order to increase demand for their products - but not all consumers are aware of this. We show that in a simple model with fake reviews and naive consumers the unique equilibrium is characterised by partial pooling, where fake reviews blend in with real ones and are persuasive. Policies that reduce the share of naive consumers have opposing effects on the two consumer groups: naives benefit, while sophisticates are harmed. A policy maker concerned with aggregate consumer welfare is thus facing a non-trivial problem. We further show that when real reviews are written strategically, they are not always truthful. Given sufficiently favourable market conditions, the equilibrium where all real reviewers are strategic is outcome equivalent to one where all consumers are sophisticates. In the context of online platforms, where the boundary between consumers and reviewers is fluid, this equivalence result has important practical implications.
    JEL: C72 D82 L15
    Date: 2021–07
  3. By: William Barnett (Department of Economics, University of Kansas and Center for Financial Stability, New York City); Sohee Park (Department of Economics, University of Kansas)
    Abstract: This paper investigates the performance of the Credit-Card-Augmented Divisia monetary aggregates in forecasting U.S. inflation and output growth at the 12-month horizon. We compute recursive and rolling out-of-sample forecasts using an Autoregressive Distributed Lag (ADL) model based on Divisia monetary aggregates. We use the three available versions of those monetary aggregate indices, including the original Divisia aggregates, the credit card-augmented Divisia, and the credit-card-augmented Divisia inside money aggregates. The source of each is the Center for Financial Stability (CFS). We find that the smallest Root Mean Square Forecast Errors (RMSFE) are attained with the credit-card-augmented Divisia indices used as the forecast indicators. We also consider Bayesian vector autoregression (BVAR) for forecasting annual inflation and output growth.
    Keywords: Divisia, Credit-Card-Augmented Divisia, Monetary Aggregates, Forecasting, Bayesian vector autoregression, Inflation, Output Growth.
    JEL: C32 C53 E31 E47 E51
    Date: 2021–10
  4. By: Thitima Chucherd; Chanokkarn Mek-yong; Nalin Nookhwun; Passawuth Nuntnarumit; Natta Piyakarnchana; Suparit Suwanik
    Abstract: This paper explores three monetary and financial issues of retail central bank digital currency (CBDC) in the Thai context. The first insight shows that opportunities in the digital age may arise for Thai citizens and businesses to reap the benefits of a more efficient form of public money and financial innovation. It is possible for Thai citizens to quickly adopt unremunerated CBDC for transactional use within a decade. Second, we point out that there are several ways to utilize retail CBDC for enhancing monetary policy effectiveness, namely, through the bank rate channel and the introduction of new monetary policy tools. Nevertheless, monetary policy should not be the first and foremost objective for the central bank to issue CBDC as there are other factors to consider. These included impacts on the central bank balance sheet and monetary operations, especially for remunerated CBDC. Disintermediation and liquidity risks for Thai financial institutions are also key concerns, which are discussed in the third part. We assess that the risks to the banking sector are low in normal periods, but the well-designed CBDC features are necessary to prevent mounting liquidity risks in distressed periods.
    Keywords: CBDC; Digital Currency; Digital Money; Financial Landscape; Monetary Policy; Financial Stability
    JEL: E41 E42 E52 E58 G21
    Date: 2021–05
  5. By: Waal, Martijn; Arets, Martijn
    Abstract: The Netherlands has been known as one of the pioneers in the sharing economy. At the beginning of the 2010s, many local initiatives such as Peerby (borrow tools and other things from your neighbours), SnappCar (p2p car-sharing), and Thuisafgehaald (cook for your neighbours) launched that enabled consumers to share underused resources or provide services to each other. This was accompanied by a wide interest from the Dutch media, zooming in on the perceived social and environmental benefits of these platforms. Commercial platforms such as Uber, UberPop and Airbnb followed soon after. After their entrance to the market, the societal debate about the impact of these platforms also started to include the negative consequences. Early on, universities and national research and policy institutes took part in these discussions by providing definitions, frameworks, and analyses. In the last few years, the attention has shifted from the sharing economy to the much broader defined platform economy.
    Keywords: Gig Work; Public Values; Shared Mobility; Sharing Economy
    JEL: L86
    Date: 2021
  6. By: Kanis Saengchote
    Abstract: Bank runs are a natural phenomenon for financial institutions that issue fixed value liabilities (e.g. money) that are backed by assets with uncertain value. I analyze Iron Finance, a decentralized finance (DeFi) protocol that issues stablecoin (a token with fixed nominal exchange rate: IRON) liabilities in exchange for a basket of other tokens (including a token issued by the protocol itself: TITAN). A combination of mathematical algorithms and incentive to arbitrage is used to maintain the exchange rate peg, but a shock to the protocol sent it into a downward spiral – much like a bank run. The incentives built into the protocol to defend the peg exacerbated its unravelling, raising the challenge of how DeFi protocols can address this vulnerability while remaining decentralized.
    Keywords: DeFi; Stablecoin; Bank Run; Self-fulfilling Panic
    JEL: G00 G23
    Date: 2021–07
  7. By: Ayushi Bajaj (Monash University); Nikhil Damodaran (O.P. Jindal Global University)
    Abstract: Consumer payment choice is based on heterogeneous preferences, availability, usage costs, and effective taxes. We examine the consequences of this choice on consumption distribution, aggregate output, welfare and the shadow economy. We analyze India’s sudden demonetization of 86% of the cash in circulation with new notes gradually being replaced over the next several months. The welfare cost of this liquidity shock was equivalent to 1% of total consumption. Even though all consumers experienced a decline in welfare, its extent varied depending on the degree of cash dependence and the ability to switch to non-cash payments. The middle consumption deciles were disproportionately affected.
    Keywords: Money, Payments, Shadow economy, Demonetization, Monetary policy
    JEL: D83 E41 E52 E58 O17
    Date: 2021–10
  8. By: Kanis Saengchote
    Abstract: One of the benefits of decentralized finance (DeFi) – an alternative financial system built on blockchain – is composability, which means the system’s building blocks (tokens) can freely interact with one another to form new services. One example is stablecoin, a token with fixed exchange rate, which is backed by token collaterals. While stablecoins can be used to facilitate payments and exchanges, in DeFi they can be used to earn returns (“yield farming†), potentially multiplicatively. We use transaction-level blockchain data to analyze a stablecoin’s flows between protocols and provide suggestive evidence of DeFi yield-chasing behavior. We shed light on what DeFi total value locked might really measure and highlight the complexity in DeFi analysis and market surveillance.
    Keywords: DeFi; Stablecoin; Total Value Locked; Yield Farming; Systemic Risk
    JEL: E00 G00
    Date: 2021–07
  9. By: Igor Makarov; Antoinette Schoar
    Abstract: In this paper, we provide detailed analyses of the Bitcoin network and its main participants. We build a novel database using a large number of public and proprietary sources to link Bitcoin addresses to real entities and develop an extensive suite of algorithms to extract information about the behavior of the main market participants. We conduct three major pieces of analysis of the Bitcoin eco-system. First, we analyze the transaction volume and network structure of the main participants on the blockchain. Second, we document the concentration and regional composition of the miners which are the backbone of the verification protocol and ensure the integrity of the blockchain ledger. Finally, we analyze the ownership concentration of the largest holders of Bitcoin.
    JEL: F38 G12 G15
    Date: 2021–10
  10. By: Qiao, Elizabeth (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)
    Abstract: In this paper, the author provides a bibliography of major and minor scholarly writings on free banking up to mid-2021. It is helpful both for expanding knowledge of the history of free banking and for providing references that may be useful for thinking about some aspects of cryptocurrencies.
    Keywords: Bibliography; free banking
    JEL: E42 E50
    Date: 2021–10–23
  11. By: Valerio Della Corte (Bank of Italy); Claudio Doria (Bank of Italy); Giacomo Oddo (Bank of Italy)
    Abstract: This paper analyses the response to the COVID-19 pandemic of inbound tourism to Italy looking at variation across countries and across provinces. To this end, it uses weekly data on the number of foreign visitors in Italy from January 2019 until February 2021, as provided by a primary mobile phone operator. We document a very robust negative relation at province level between local epidemiological conditions and the inflow of foreign travellers. Moreover, provinces with a historically higher share of art tourism, and those that used to be ‘hotel intensive’ were hit the most during the pandemic, while provinces with a more prevalent orientation towards business tourism proved to be more resilient. Entry restrictions with varying degrees of strictness played a key role in explaining cross-country patterns. After controlling for these restrictions, we observed that the travellers that could arrive by their own, private, means of transportation decreased proportionally less. Overall, this evidence emphasises that contagion risk considerations played a significant role in shaping international tourism patterns during the pandemic.
    Keywords: International tourism, travel restrictions, Covid-19
    JEL: I15 L83 F14
    Date: 2021–10
  12. By: Thammarak Moenjak; Veerathai Santiprabhob
    Abstract: In the digital era, new forms of non-bank entities have emerged and gained increasingly prominent roles in providing financial services. These non-bank entities, particularly those associated with non-financial conglomerates and large technology companies (BigTech) pose new challenges for financial regulators whether in terms of financial stability, level-playing field competition, or customer protection. This article discusses emerging trends in the rise of non-bank entities in the digital era, the challenges they pose, and what financial regulatory approaches can help to address those challenges. This article proposes that a holding company structure could be applied to regulate non-financial conglomerates or BigTech firms providing financial services through subsidiaries. This proposal is expected to help address regulatory concerns where existing regulatory approaches cannot adequately cope with.
    Keywords: Regulation; Global Economy; Industrial Organization
    JEL: G23 K21 K23 O16
    Date: 2021–06
  13. By: Kohnert, Dirk
    Abstract: Digitalization in Sub-Saharan Africa enhanced the accessibility of communications by the majority of the poor who had been excluded among others from social media, independent information channels, mobile banking and e-commerce. The creation of new economic opportunities, e.g. the pay-as-you-go business, and increased flow of information also boosted people’s self-esteem, sense of belonging and citizenship. The smartphone became the main source of internet access which also bridged the divide between urban and rural communities. Thus, mobile telecommunications contributed positively to economic growth even in less developed regions, and there is apparently still ample space for further improvement. Yet, Africans were also confronted with new forms of the digital divide between the poor and the rich, between advanced and less advanced African countries, as well as between Africa and the rest of the world. Moreover, the digitalization of the public sphere became a double-edged sword. Autocratic governments like Sudan and Togo shut down the internet during elections to facilitate the rigging of the polls. The lack of transparency and objectivity fuelled fake news which rapidly spread in social media, notably in times of the Corona crisis. Last, but not least, not everybody surfing in the internet had the same access to quality information. For example, disinformation was supported clandestinely by foreign powers to destabilize political regimes, or spy software was provided to governments to control the opposition. Both false news in social media and spy-software impeded poverty relieve in Africa significantly.
    Keywords: Digitalization, Africa, Sub-Sahara Africa, digital inclusion, poverty alleviation, pro-poor growth, transparency, social media, fake news, African Studies,
    JEL: D31 D63 D83 E26 F35 F54 F63 G21 N37 O17 O33 O55 Q48 Z13
    Date: 2021–10–19
  14. By: Cristina Franciele (UFPR - Universidade Federal do Paraná); Thays Christina Domareski Ruiz (UFPR - Universidade Federal do Parana [Curitiba] - UFPR - Universidade Federal do Paraná)
    Abstract: Purpose: Sentiment analysis is built from the information provided through text (reviews) to help understand the social sentiment toward their brand, product, or service. The main purpose of this paper is to draw an overview of the topics and the use of the sentiment analysis approach in tourism research. Methods: The study is a bibliometric analysis (VOSviewer), with a systematic and integrative review. The search occurred in March 2021 (Scopus) applying the search terms "sentiment analysis" and "tourism" in the title, abstract, or keywords, resulting in a final sample of 111 papers. Results: This analysis pointed out that China (35) and the United States (24) are the leading countries studying sentiment analysis with tourism. The first paper using sentiment analysis was published in 2012; there is a growing interest in this topic, presenting qualitative and quantitative approaches. The main results present four clusters to understand this subject. Cluster 1 discusses sentiment analysis and its application in tourism research, searching how online reviews can impact decision-making. Cluster 2 examines the resources used to make sentiment analysis, such as social media. Cluster 3 argues about methodological approaches in sentiment analysis and tourism, such as deep learning and sentiment classification, to understand the usergenerated content. Cluster 4 highlights questions relating to the internet and tourism. Implications: The use of sentiment analysis in tourism research shows that government and entrepreneurship can draw and enhance communication strategies, reduce cost, and time, and mainly contribute to the decisionmaking process and understand consumer behavior.
    Keywords: Sentiment analysis,tourism,bibliometrics,systematic review,integrative review,Vosviewer
    Date: 2021–10–18
  15. By: Krügel, Jan Philipp; Paetzel, Fabian
    JEL: C72 C91 D83 L14
    Date: 2021
  16. By: Exler, Florian; Hansak, Alexander
    JEL: E21 E43 G18 G41 G51 K12
    Date: 2021
  17. By: Hannes Thees (KU - Katholishe Universität Eichstätt); Elina Störmann (KU - Katholishe Universität Eichstätt); Franziska Thiele (Ostfalia University of Applied Sciences); Natalie Olbrich (KU - Katholishe Universität Eichstätt)
    Abstract: Purpose: This study addresses the digital transformation in tourism, accelerated due to the COVID-19 pandemic. By linking the front-and backstage activities, a model of the tourism value system is sketched with the aim to assist the shift toward digital value creation in the case of the German tourism sector by asking, What are the challenges for the digital transformation of tourism service providers, and how can it be promoted along with the tourism value system? Methods: Recognizing the processual challenges of digitalization, this contribution builds upon a mixedmethods approach. First, a quantitative online survey (n = 372) was conducted by the German Competence Center for Tourism at the beginning of the COVID-19 pandemic. The results were discussed in a workshop with 40 experts from the tourism industry in September 2020, where the COVID-19 pandemic was referred to. Results: The focus of tourism service providers is predominantly the digitalization of guest communication, whereas corporate strategies on digitalization are widely not available. Key findings of the survey indicate that competitiveness in digitalization will depend on the appropriate infrastructure, clear strategies, and organizational integration. Implications: The study affirms the increased speed of digital transformation against the backdrop of the COVID-19 pandemic and reveals the need for greater focus on internal processes. In addition, an orchestrated linking of the service providers in a digital ecosystem that is supported by national efforts is proposed.
    Keywords: Digital transformation,German tourism service providers,digital tools and value creation,digitalization of the tourism value system,knowledge gap JEL Classification: L83,N7,Z30
    Date: 2021–10–08
  18. By: Rémi Mencarelli (Institut d'Administration des Entreprises (IAE) - Savoie Mont-Blanc); Arnaud Rivière (Institut d'Administration des Entreprises (IAE) - Tours); Cindy Lombart (Audencia Recherche - Audencia Business School)
    Abstract: The academic literature generally asserts that omnichannel strategies create value throughout the customer journey based on the principle of synergy between channels. However, such strategies may appear complex to customers, notably when they face myriad e-channels that constitute all means of accessing the offer. Specifically, for digital information products, such as those of the press, digitalized content is now consumed through multiple e-channels. Our study aims to investigate the impact of e-channel combinations on the perceived value of a digital information product during the usage phase. We hypothesize that the similarity between the e-channels used by customers has a negative impact on the perceived value model. To test the research hypotheses, we conducted a longitudinal study of the readers of a digital version of an international newspaper. The results demonstrate that the similarity of echannels impedes value creation. Our findings reintroduce a more ambivalent vision of the omnichannel strategy in a digital environment and provide insights into how managers should support customers by clarifying the usefulness of each e-channel proposed.
    Keywords: Omnichannel strategy,e-channel,value,sacrifice,benefit,digital information product
    Date: 2021–11
  19. By: Romain Baeriswyl; Samuel Reynard; Alexandre Swoboda
    Abstract: The issuance of retail central bank digital currency (CBDC) entails a transfer of risk from commercial banks to the central bank. While this paper does not provide an overall assessment on whether or not to issue a retail CBDC, it analyzes how different mechanisms to limit the risk transfer, such as an unattractive interest rate on retail CBDC, a quantity ceiling or preventing convertibility of cash and reserves into CBDC, have different effects on the ability of retail CBDC to fulfil its intended purposes. In particular, these mechanisms hinder the use of CBDC as a medium of exchange. Specific aspects of demand and challenges related to a potential retail CBDC in Switzerland, namely, a small open economy with a safe-haven currency and a low level of government debt, are discussed.
    Keywords: Retail central bank digital currency
    JEL: E42 E52 E58
    Date: 2021

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