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on Payment Systems and Financial Technology |
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Issue of 2021‒12‒06
twenty-one papers chosen by |
| By: | Erik Feyen; Jon Frost; Harish Natarajan; Tara Rice |
| Abstract: | Proposals for global stablecoins have put a much-needed spotlight on deficiencies in financial inclusion and cross-border payments and remittances in emerging market and developing economies (EMDEs). Yet stablecoin initiatives are no panacea. While they may achieve adoption in certain EMDEs, they may also pose particular development, macroeconomic and cross-border challenges for these countries and have not been tested at scale. Several EMDE authorities are weighing the potential costs and benefits of central bank digital currencies (CBDCs). We argue that the distinction between token-based and account-based money matters less than the distinction between central bank and non-central bank money. Fast-moving fintech innovations that are built on or improve the existing financial plumbing may address many of the issues in EMDEs that both private stablecoins and CBDCs aim to tackle. |
| JEL: | E42 E51 E58 F31 G28 O33 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:973&r= |
| By: | Isaiah Hull; Or Sattath |
| Abstract: | The properties of money commonly referenced in the economics literature were originally identified by Jevons (1876) and Menger (1892) in the late 1800s and were intended to describe physical currencies, such as commodity money, metallic coins, and paper bills. In the digital era, many non-physical currencies have either entered circulation or are under development, including demand deposits, cryptocurrencies, stablecoins, central bank digital currencies (CBDCs), in-game currencies, and quantum money. These forms of money have novel properties that have not been studied extensively within the economics literature, but may be important determinants of the monetary equilibrium that emerges in the forthcoming era of heightened currency competition. This paper makes the first exhaustive attempt to identify and define the properties of all physical and digital forms of money. It reviews both the economics and computer science literatures and categorizes properties within an expanded version of the original functions-and-properties framework of money that includes societal and regulatory objectives. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2111.04483&r= |
| By: | Daniela Balutel; Christopher Henry; Jorge Vásquez; Marcel Voia |
| Abstract: | We develop a tractable model of Bitcoin adoption with network effects and social learning, which we then connect to unique data from the Bank of Canada’s Bitcoin Omnibus Survey for the years 2017 and 2018. The model determines how the probability of Bitcoin adoption depends on (1) network effects; (2) individual learning effects; and (3) social learning effects. After accounting for the endogeneity of beliefs, we find that both network effects and individual learning effects have a positive and significant direct impact on Bitcoin adoption, whereas the role of social learning is to ameliorate the marginal effect of the network size on the likelihood of adoption. In particular, in 2017 and 2018, a one percentage point increase in the network size increased the probability of adoption by 0.45 and 0.32 percentage points, respectively. Similarly, a one percentage point increase in Bitcoin beliefs increased the probability of adoption by 0.43 and 0.72 percentage points. Our results suggest that network effects, individual learning, and social learning were important drivers of Bitcoin adoption in 2017 and 2018 in Canada. |
| Keywords: | Digital currencies and fintech; Econometric and statistical methods; Economic models |
| JEL: | D83 O33 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:21-60&r= |
| By: | Ms. Sumiko Ogawa; Purva Khera; Miss Stephanie Y Ng; Ms. Ratna Sahay |
| Abstract: | Digital financial services have been a key driver of financial inclusion in recent years. While there is evidence that financial inclusion through traditional services has a positive impact on economic growth, do the same results carry over for digital financial inclusion? What drives digital financial inclusion? Why does it advance more in some countries but not in others? Using new indices of financial inclusion developed in Khera et. al. (2021), this paper addresses these questions for 52 developing countries. Using cross-sectional instrument variable procedure, we find that the exogenous component of digital financial inclusion is positively associated with growth in GDP per capita during 2011-2018, which suggests that digital financial inclusion can accelerate economic growth. Fractional logit and random effects empirical estimation identifies access to infrastructure, financial and digital literacy, and quality of institutions as key drivers of digital financial inclusion. These findings are then used to help inform policy recommendations in areas related to the digitization of financial services to promote financial inclusion. |
| Keywords: | A. literature review; digitization of financial services; capital markets department; growth rate; Digital financial services; number in bracket; regression equation; Financial inclusion; Mobile banking; Middle East and Central Asia; Caribbean; Asia and Pacific |
| Date: | 2021–06–11 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/167&r= |
| By: | CARBALLA SMICHOWSKI Bruno (European Commission – JRC); DUCH BROWN Nestor (European Commission – JRC); GOMEZ LOSADA Alvaro (European Commission – JRC); MARTENS Bertin (European Commission – JRC) |
| Abstract: | Recent literature has shown that the existence of supply and demand-side non-generic complementarities (“demand-side linkages") within ecosystems raises questions about the pertinence of defining a single relevant market comprising substitute products (“substitutability approach"). However, empirical methodologies to measure these linkages and asses the competitive dynamics underpinning them are lacking. Using recent data from internet traffic between the major 246 European digital platforms, we develop such a methodology and test some theoretical findings of the ecosystems literature with major implications for competition and regulatory analysis. We corroborate that demand-side linkages are a non-negligible phenomenon: 18% of these platforms show them. However, unlike what the ecosystems literature predicts, in roughly half of the cases they do not link complementors but platforms competing in at least one market. Finally, while, as expected, we observe demand-side linkages mostly within industry-defined ecosystems, we find evidence of industry-agnostic ecosystems. These could be instigated and orchestrated by platform users instead of by a firm. We conclude that the substitutability approach is not obsolete, but needs to be complemented with alternative approaches in order to i) take into account coopetition within the same relevant market and ii) analyze how the competitive process in one market can impact the welfare generated in another (industry's) market through non-generic complementarities. |
| Keywords: | ecosystems, platforms, complementarities, relevant market |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:decwpa:202107&r= |
| By: | Andrea Coveri; Claudio Cozza; Dario Guarascio |
| Abstract: | The paper applies the radical view of Monopoly Capitalism to the digital platform economy. Based on the seminal ideas of Hymer and Zeitlin that led Cowling and Sugden to define the large monopolistic firm as a means to plan production from a unique centre of strategic decision-making, we attempt to develop a framework where digital platforms are conceived as an evolution of large transnational corporations. Power and control in our Monopoly Capitalism view are then meant not only in terms of market relations, but rather as levers for coordinating global production and influencing world societies. Applying this framework to the Amazon case, we highlight the key analytical dimensions to be considered: not only Amazon dominates other firms and suppliers through its diversification and a direct control of data and technology; its power is also linked to global labour fragmentation and uneven bargaining power vis-Ã -vis world governments, as in the Hymer and Cowling's tradition. |
| Keywords: | Monopoly Capital; Monopoly Power; Digital Platforms; Amazon; Multinational corporation |
| JEL: | L12 L22 P12 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:sap:wpaper:wp209&r= |
| By: | Raphael Auer; Jon Frost; Leonardo Gambacorta; Cyril Monnet; Tara Rice; Hyun Song Shin |
| Abstract: | In just a few years, central banks have rapidly ramped up their research and development effort on central bank digital currencies (CBDCs). A growing body of economic research informs these activities, often focusing on the "reserves for all" aspect of CBDCs for retail use. However, CBDCs should be considered in the full context of the digital economy and the centrality of data, which raises concerns around competition, payment system integrity and privacy. This paper gives a guided tour of the growing literature on CBDCs on the microeconomic considerations related to operational architectures, technologies and privacy, and the macroeconomic implications for the financial system, financial stability and monetary policy. A set of questions, particularly on the cross-border dimensions of CBDCs, remains unresolved, and calls for further work to expand the research frontier. |
| JEL: | C72 C73 D4 E42 E58 G21 O32 L86 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:976&r= |
| By: | Giacomo De Giorgi; Matthew Harding; Gabriel Vasconcelos |
| Abstract: | Data on hundreds of variables related to individual consumer finance behavior (such as credit card and loan activity) is routinely collected in many countries and plays an important role in lending decisions. We postulate that the detailed nature of this data may be used to predict outcomes in seemingly unrelated domains such as individual health. We build a series of machine learning models to demonstrate that credit report data can be used to predict individual mortality. Variable groups related to credit cards and various loans, mostly unsecured loans, are shown to carry significant predictive power. Lags of these variables are also significant thus indicating that dynamics also matters. Improved mortality predictions based on consumer finance data can have important economic implications in insurance markets but may also raise privacy concerns. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2111.03662&r= |
| By: | He Pan (The West Center for Economics Research, Southwestern University of Finance and Economics, Chengdu, China); Stefania Lovo (Department of Economics, University of Reading); Marcella Veronesi (Department of Technology, Management and Economics, Technical University of Denmark, and Department of Economics, University of Verona, Italy) |
| Abstract: | We provide novel empirical evidence on the association between social networks and the adoption of renewable energy technology. We distinguish between two main transmission mechanisms through which social networks can affect renewable energy technology adoption: information diffusion and social influence. Using data primarily collected from rural China on biogas adoption, we find that both mechanisms are at work. In addition, we find that information spreads through trusted network members, such as friends and family, while social influence is mainly exercised by government officials. Government officials are more likely to promote the adoption of technology by leading by example rather than by spreading information. |
| Keywords: | Social networks, social influence, information diffusion, renewable energy, biogas, China |
| JEL: | O13 O33 Q16 Q42 Q55 Q56 |
| Date: | 2021–11–09 |
| URL: | http://d.repec.org/n?u=RePEc:rdg:emxxdp:em-dp2021-19&r= |
| By: | Reda Cherif; Karl Walentin; Brandon Buell; Carissa Chen; Jiawen Tang; Nils Wendt |
| Abstract: | The COVID-19 pandemic underscores the critical need for detailed, timely information on its evolving economic impacts, particularly for Sub-Saharan Africa (SSA) where data availability and lack of generalizable nowcasting methodologies limit efforts for coordinated policy responses. This paper presents a suite of high frequency and granular country-level indicator tools that can be used to nowcast GDP and track changes in economic activity for countries in SSA. We make two main contributions: (1) demonstration of the predictive power of alternative data variables such as Google search trends and mobile payments, and (2) implementation of two types of modelling methodologies, machine learning and parametric factor models, that have flexibility to incorporate mixed-frequency data variables. We present nowcast results for 2019Q4 and 2020Q1 GDP for Kenya, Nigeria, South Africa, Uganda, and Ghana, and argue that our factor model methodology can be generalized to nowcast and forecast GDP for other SSA countries with limited data availability and shorter timeframes. |
| Keywords: | model prediction; quantile plot; ML model; GDP YoY; data variable; YoY percent change; Factor models; Machine learning; Time series analysis; Spot exchange rates; Mobile banking; Africa; Sub-Saharan Africa |
| Date: | 2021–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/124&r= |
| By: | Li, Ye (Ohio State University); Li, Yi (Board of Governors of the Federal Reserve System) |
| Abstract: | Deposits finance bank lending and serve as means of payment for bank customers. Under uncertain payment flows, deposits are debts with random maturities. Payment outflows drain reserves, and the risk is most prominent when funding markets are under stress and banks are unable to smooth out payment shocks. We provide the first evidence on the negative impact of payment risk on bank lending, bridging the literatures on payment systems and credit supply. An interquartile increase in payment risk is associated with a decline in loan growth rate that is 10% of standard deviation. Our findings are stronger in times of funding stress and robust across banks of different sizes and loans of long and short maturities. Banks with higher payment risk raise deposit rates to expand customer base and internalize payment flows. Finally, we show that payment risk dampens the bank lending channel of monetary policy transmission. |
| JEL: | E42 E43 E44 E51 E52 G21 G28 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ohidic:2021-17&r= |
| By: | Tilahun, Mesfin; Holden, Stein T. |
| Keywords: | Research and Development/Tech Change/Emerging Technologies, Labor and Human Capital |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae21:315118&r= |
| By: | Simplice A. Asongu (Yaounde, Cameroon); Valentine B. Soumtang (University of Yaoundé II, Cameroon); Ofeh M. Edoh (Yaoundé, Cameroon) |
| Abstract: | This study assesses financial determinants of informal financial sector development in 48 Sub-Saharan African countries for the period 1995-2017. Quantile regressions are used as the empirical strategy which enables the study to assess the determinants throughout the conditional distribution of informal sector development dynamics. The following financial determinants affect informal financial development and financial informalization differently in terms of magnitude and sign: bank overhead costs; net internet margin; bank concentration; return on equity; bank cost to income ratio; financial stability; loans from non-resident banks; offshore bank deposits and remittances. The determinants are presented from a plethora of perspectives, inter alia: U-Shape, S-Shape and positive or negative thresholds. The study not only provides a practical way by which to assess the incidence of financial determinants on informal financial sector development, but also provides financial instruments by which informal financial development can be curbed. |
| Keywords: | Informal finance; financial development; Africa |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:21/077&r= |
| By: | Madiha Bendjaballah (CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine) |
| Abstract: | Ces dernières années, les points de vente se sont engagés dans un processus de digitalisation pour accompagner le client dans ses nouvelles habitudes de shopping et lui permettre une continuité entre son parcours d'achat virtuel et réel. Pour cela, nombre d'outils digitaux sont utilisés par les enseignes : écrans géants, technologie 3D, tablettes numériques en libre-service ou tablettes utilisées par les vendeurs…De nombreuses recherches ont été menées sur la digitalisation des points de vente, mais rares sont celles qui analysent la dyade client connecté/vendeur connecté. Par ailleurs, une seule étude, à notre connaissance, s'est intéressée à l'impact du digital sur les interactions client/vendeur. Cette thèse tente d'apporter un éclairage à cette délicate question en s'intéressant plus particulièrement à l'utilisation de l'instrument digital analysé dans une situation d'activité. L'instrument n'est pas analysé au travers de ses fonctions mais en tant que moyen d'action pour le client ou le vendeur et au travers des situations d'activités dans lesquelles il s'inscrit. Nous nous inscrivons ainsi dans une relation triadique ou tripolaire qui intègre l'instrument digital comme troisième pôle entre le sujet et l'objet. |
| Date: | 2021–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03398824&r= |
| By: | Joan Calzada (Universitat de Barcelona); Nestor Duch-Brown (Joint Research Centre); Ricard Gil (Smith School of Business, Queen’s University) |
| Abstract: | Search engines are one of the main channels to access news content of traditional newspapers. In the European Union, organic search traffic from Google accounts for 35% of news outlets’ visits. Yet, the effects of Google Search on market competition and information diversity are ambiguous, as the firm indexes news outlets considering both domain authority and information accuracy. Using detailed daily data traffic for 606 news outlets from 15 European countries, we assess the effect of Google Search’s indexation on search visits. Our identification strategy exploits nine core algorithm updates rolled out by Google between 2018 and 2020 in order to achieve exogenous variation in news outlets’ indexation. Several conclusions follow from our estimations. First, Google core updates overall reduce the number of keywords that news outlets have in top positions in search results. Second, keywords ranked in top search position have a positive effect on news outlets’ visits. Third, our results are robust when we focus the analysis on different types of news outlets, but are less conclusive when we consider national markets separately. Our paper also analyzes the effects of Google core updates on media market concentration. We find that the three “big†core updates identified in this period reduced market concentration by 1%, but this effect was mostly compensated by the rest of the updates. |
| Keywords: | Media market, Google Search, Europe, core algorithm updates. |
| JEL: | L1 L5 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ewp:wpaper:415web&r= |
| By: | Ryan Niladri Banerjee; José María Serena Garralda |
| Abstract: | Direct lenders, non-bank credit intermediaries with low leverage, have become increasingly important players in corporate loan markets. In this paper we investigate the role they play in the monetary policy transmission mechanism, using syndicated loan data covering the 2000-2018 period. We show that direct lenders are more likely to join loan syndicates whenever monetary policy announcements trigger a contraction in borrowers' net worth irrespective of the directional change in interest rates. Thus, our findings suggest that direct lenders dampen the financial accelerator channel of monetary policy. |
| Keywords: | direct lending, monetary policy, financial accelerator, credit channel |
| JEL: | G21 G32 F32 F34 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:979&r= |
| By: | Rajkhowa, Pallavi; Kornher, Lukas |
| Keywords: | Marketing, Research and Development/Tech Change/Emerging Technologies |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae21:314963&r= |
| By: | Claudio Borio |
| Abstract: | The central banking community is facing major challenges – economic, intellectual and institutional. A key economic challenge is the need to rebuild room for policy manoeuvre, which has fallen drastically over time. This lecture focuses on the intellectual challenge, ie facts on the ground are increasingly testing the longstanding analytical paradigms on which central banks can rely to inform their policies. It argues that certain deeply held beliefs underpinning those paradigms can complicate the task of regaining policy headroom. |
| Keywords: | monetary policy, business cycle, financial cycle, inflation, deflation, natural interest rate |
| JEL: | E43 E51 E52 E58 E31 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:981&r= |
| By: | Michels, Marius; Musshoff, Oliver |
| Keywords: | Research and Development/Tech Change/Emerging Technologies, Research Methods/ Statistical Methods |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae21:315358&r= |
| By: | Nakamura, Nobuyuki; Suzuki, Aya |
| Keywords: | Health Economics and Policy, Labor and Human Capital |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae21:314965&r= |
| By: | Ma, Wanglin; Zheng, Hongyun |
| Keywords: | Research and Development/Tech Change/Emerging Technologies, Crop Production/Industries |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae21:314991&r= |