nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2022‒01‒03
fifteen papers chosen by

  1. Central Bank Digital Currency and Banking: Macroeconomic Benefits of a Cash-Like Design By Jonathan Chiu; Mohammad Davoodalhosseini
  2. Revisiting the Monetary Sovereignty Rationale for CBDCs By Skylar Brooks
  3. The Economic Impact of Mobile Phone Ownership: Results from a Randomized Controlled Trial in Tanzania By Philip; Roessler; Peter; Carroll; Flora; Myamba; Cornel; Jahari; Blandina; Kilama; Daniel; Nielson
  4. Optimal bidding strategies for digital advertising By Médéric Motte; Huyên Pham
  5. Addressing the challenges of digital lending for credit markets and the financial system in low- and middle-income countries By Sommer, Christoph
  6. The Fairness of Credit Scoring Models By Christophe HURLIN; Christophe PERIGNON; Sébastien SAURIN
  7. Firms going digital: Tapping into the potential of data for innovation By David Gierten; Steffen Viete; Raphaela Andres; Thomas Niebel
  8. Will it stay or will it go? Analysing developments in telework during COVID-19 using online job postings data By Pawel Adrjan; Gabriele Ciminelli; Alexandre Judes; Michael Koelle; Cyrille Schwellnus; Tara Sinclair
  9. Using a natural experiment in the taxicab industry to analyze the effects of third-party income reporting By Bibek Adhikari; James Alm; Brett Collins; Michael Sebastiani; Eleanor Wilking
  10. Airbnb in Provence Côte d'Azur By Jean-Charles Briquet-Laugier; Clémentine Chier; Sylvie Rochhia; Dominique Torre
  11. Covid 19 and the media By Maxim Ananyev,; Michael Poyker; Yuan Tian
  12. Technology Adoption and Skills A Pilot Study of Kent SMEs By Catherine Robinson; Christian Siegel; Sisi Liao
  13. Technology adoption and the bank lending channel of monetary policy transmission By Hasan, Iftekhar; Li, Xiang
  14. Historical Prevalence of Infectious Diseases and Entrepreneurship: the Role of Institutions in 125 Countries By Omang O. Messono; Simplice A. Asongu
  15. Optimal incentives in a limit order book: a SPDE control approach By Bastien Baldacci; Philippe Bergault

  1. By: Jonathan Chiu; Mohammad Davoodalhosseini
    Abstract: Should a central bank digital currency (CBDC) be issued? Should its design be cash- or deposit-like? To answer these questions, we theoretically and quantitatively assess the effects of a CBDC on consumption, banking and welfare. Our model introduces new general equilibrium linkages across different types of retail transactions as well as a novel feedback effect from transactions to deposit creation. The general equilibrium effects of a CBDC are decomposed into three channels: payment efficiency, price effects and bank funding costs. We show that a cash-like CBDC is more effective than a deposit-like CBDC in promoting consumption and welfare. Interestingly, a cash-like CBDC can also crowd in banking, even in the absence of bank market power. In a calibrated model, at the maximum, a cash-like CBDC can increase bank intermediation by 5.8% and capture up to 25% of the payment market. In contrast, a deposit-like CBDC can crowd out banking by up to 2.6%, thereby grabbing a market share of about 16.7%.
    Keywords: Digital currencies and fintech; Monetary policy; Monetary policy framework
    JEL: E58
    Date: 2021–12
  2. By: Skylar Brooks
    Abstract: As currently articulated, the monetary sovereignty argument for central bank digital currencies (CBDCs) rests on the idea that without them, private and foreign digital monies could displace domestic currencies (a process called currency substitution), threatening the central bank’s monetary policy and lender-of-last-resort (LLR) capabilities. This rationale provides a crucial but incomplete picture of what is at stake in terms of monetary sovereignty. This paper seeks to expand and enhance this picture in three ways. The first is by looking at the consequences of currency substitution that go beyond the functions of a central bank—important considerations that have received less attention in public CBDC discussions. The second is by exploring key differences in monetary policy and LLR capabilities across currency-issuing countries or regions. More specifically, the paper highlights the variation in the degree of monetary sovereignty and the consequences that different countries face should they lose it. The third way is by assessing not only the implications but also the risks of currency substitution and showing how these are also likely to vary across countries. Contrasting the consequences and risks of substitution, the paper concludes by noting a potential inverse relationship between the impact and probability of losing monetary sovereignty.
    Keywords: Debt management; Digital currencies and fintech; Exchange rate regimes; Financial stability; Monetary policy
    JEL: E41 E42 E52 E58 H12 H63
    Date: 2021–12
  3. By: Philip; Roessler; Peter; Carroll; Flora; Myamba; Cornel; Jahari; Blandina; Kilama; Daniel; Nielson
    Abstract: We study the causal impact of reducing the mobile gender gap. Leveraging one of the first large-scale experimental studies on women’s mobile phone ownership, we find that in Tanzania over thirteen months smartphones increased households’ annual consumption per capita by 20% compared to control. Consumption gains operated through women’s control and use of the smartphones. However, treatment effects were attenuated by handset turnover. By endline only 34% in the smartphone condition still possessed their handsets. This highlights the economic benefits of closing the mobile gender gap but also the tenuous nature of productive asset ownership for women in low-income households.
    Keywords: finance and microfinance; climate change; anticipatory humanitarian action
    JEL: J16 L96 O12 O33
    Date: 2021
  4. By: Médéric Motte (LPSM (UMR_8001) - Laboratoire de Probabilités, Statistiques et Modélisations - UPD7 - Université Paris Diderot - Paris 7 - SU - Sorbonne Université - CNRS - Centre National de la Recherche Scientifique); Huyên Pham (LPSM (UMR_8001) - Laboratoire de Probabilités, Statistiques et Modélisations - UPD7 - Université Paris Diderot - Paris 7 - SU - Sorbonne Université - CNRS - Centre National de la Recherche Scientifique)
    Abstract: With the emergence of new online channels and information technology, digital advertising tends to substitute more and more to traditional advertising by offering the opportunity to companies to target the consumers/users that are really interested by their products or services. We introduce a novel framework for the study of optimal bidding strategies associated to different types of advertising, namely, commercial advertising for triggering purchases or subscriptions, and social marketing for alerting population about unhealthy behaviours (anti-drug, vaccination, road-safety campaigns). Our continuoustime models are based on a common framework encoding users online behaviours via their web-browsing at random times, and the targeted advertising auction mechanism widely used on Internet, the objective being to efficiently diffuse advertising information by means of digital channels. Our main results are to provide semi-explicit formulas for the optimal value and bidding policy for each of these problems. We show some sensitivity properties of the solution with respect to model parameters, and analyse how the different sources of digital information accessible to users including the social interactions affect the optimal bid for advertising auctions. We also study how to efficiently combine targeted advertising and non-targeted advertising mechanisms. Finally, some classes of examples with fully explicit formulas are derived.
    Keywords: Bid optimisation,auction,targeted advertising,digital information,Point processes,martingale techniques JEL Classification: C70,C61 MSC Classification: 91B26,90B60,60G55
    Date: 2021–11–15
  5. By: Sommer, Christoph
    Abstract: The demand for digital financial services has risen significantly over recent years. The COVID-19 pandemic has accelerated this trend and since the focus has shifted towards economic recovery, digital lending has become central. Digital credit products exploit traditional and alternative financial and non-financial data to provide access to finance for households and micro, small and medium enterprises (MSMEs). While it makes lending more inclusive for underserved or unserved households and firms, its increasing influence also brings forth challenges that need to be addressed by policy-makers and regulators in order to guarantee well-functioning credit markets and broader financial systems that foster sustainable economic development. A central concern is the adverse effect of digital lending on the stability and integrity of credit markets (and potentially the wider financial systems). The rise in non-performing loans, even before the COVID-19 crisis, has been associated with an increase in digital credits. New players with little experience enter the market and exploit regulatory arbitrage, but often these players have no (or only a partial) obligation to report to respective systems for sharing credit information or to supervisory bodies, which introduces severe vulnerabilities. In addition, the low entry threshold of digital financial products, due to their convenience and simplicity for customers, provides fertile ground for exploitative financialisation. Underserved households and MSMEs with limited financial literacy may be lured into taking up unsuitable and unaffordable digital credits, leading to over-indebtedness and bankruptcy. The last challenge arises from significantly shorter loan maturities in MSME lending if current forms of digital lending are scaled up. This is problematic, as firms need loans with longer maturities to realise productivity-enhancing medium- and long-term investments, many of which include complementary investments in labour, thereby contributing to an improvement in job quality. Governments and regulators need to strike a balance between leveraging the potential of digital lending for inclusive finance and economic recovery from the COVID-19 crisis, and mitigating associated risks. In particular, they should, together with providers of technical and financial development cooperation, consider the following: - Fostering the integrity of (digital) credit markets. Regulators should establish specific licenses and regulations for all digital financial service providers, and introduce obligatory reporting requirements to supervisory bodies and national systems for sharing credit information. - Preventing exploitative financialisation. Regulators need to require digital lenders to present the costs and risks of their loan products in a manner comprehensible to consumers with little financial literacy, and extend consumer protection policies to digital financial services. - Ensuring availability of loans with longer maturities. Development finance institutions and other national and international promoters of (M)SMEs should assist local banks in the provision of longer-term loans, e.g. by offering respective funds or partial credit guarantees. - Establishing regulatory sandboxes. Regulators should launch regulatory sandboxes to test legislation in a closed setting and to learn about risks without hindering innovation.
    Date: 2021
  6. By: Christophe HURLIN; Christophe PERIGNON; Sébastien SAURIN
    Keywords: , Discrimination, Credit markets, Machine Learning, Artificial intelligence
    Date: 2021
  7. By: David Gierten; Steffen Viete; Raphaela Andres; Thomas Niebel
    Abstract: This paper aims to help policy makers understand and improve the conditions for firms to thrive in an increasingly digital economy where data has become an important resource for innovation. The paper: 1) analyses trends in the adoption of information and communication technologies and activities that enable firms to collect, store and use data, including big data analysis (BDA); 2) provides new evidence from micro-econometric analysis of firms’ BDA and innovation in products, processes, marketing and organisation, considering different types of data used for BDA; 3) examines business models of firms that successfully innovate with data; and 4) discusses policies that can help improve the conditions for all firms to go digital and tap into the potential of data for innovation.
    Date: 2021–12–20
  8. By: Pawel Adrjan; Gabriele Ciminelli; Alexandre Judes; Michael Koelle; Cyrille Schwellnus; Tara Sinclair
    Abstract: The COVID-19 crisis has triggered a major shift towards telework and virtual interactions. This paper uses information on job postings from the online job site Indeed to analyse developments in the adoption of telework across 20 countries. It finds, first, that the incidence of advertised telework almost tripled during the pandemic, albeit with large differences both across sectors and across countries. Second, cross-country differences are to a notable extent explained by differences in the extent to which governments restricted mobility during the pandemic. However, while the tightening of restrictions substantially raises advertised telework, their easing only modestly reverses the increase. Third, digital preparedness plays an important role in mediating the response of advertised telework to changes in restrictions. The tightening of restrictions has particularly large effects in sectors that are better prepared to adopt digital business models, while their easing has almost no effect in countries with high-quality digital infrastructure. Overall, these results suggest that telework is here to stay, especially in countries with high levels of digital preparedness. Public policies will need to adapt to reap the potential benefits for productivity and worker well-being.
    Keywords: digital infrastructure, mobility restrictions, telework
    JEL: D23 E24 J23 G18 M50
    Date: 2021–12–16
  9. By: Bibek Adhikari (Illinois State University); James Alm (Tulane University); Brett Collins (Internal Revenue Service); Michael Sebastiani (Internal Revenue Service); Eleanor Wilking (Cornell School of Law)
    Abstract: This paper uses confidential tax returns data from sole proprietor businesses to estimate behavioral responses to the introduction of Form 1099-K, a third-party income reporting law that requires credit and debit card companies to report to the Internal Revenue Service gross of payment transactions that businesses receive through their payment systems. We estimate the causal impact of Form 1099-K on business reporting by exploiting a natural experiment in which some cities in the U.S. passed ordinances requiring taxicabs to install credit card readers in their vehicles, while other cities did not pass such ordinances, creating plausibly exogenous variation in the share of receipts reported on Form 1099-K. We find that taxpayers respond to third-party information reporting in offsetting ways. In particular, we find that businesses from cities with mandatory credit card in taxicab ordinances reported more receipts after the introduction of Form 1099-K compared to similar businesses from cities without mandatory credit card in taxicab ordinances, but they also reported an increase in expenses of similar magnitude. On net, third-party information reporting led to small and statistically insignificant changes in taxable income, profit, and tax liability. These results are robust to a variety of alternative specifications and placebo tests.
    Keywords: Income reporting, Tax enforcement, Tax compliance, Taxi industry, Sole proprietors
    JEL: H25 H26 H32
    Date: 2021–12
  10. By: Jean-Charles Briquet-Laugier; Clémentine Chier; Sylvie Rochhia; Dominique Torre (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur)
    Abstract: The purpose of this report is to identify the changes brought about by short-term rental booking platforms to tourist accommodation in Provence Alpes Côte d'Azur. It is based on data from the Airbnb platform, the world and regional leader in the sector, and analyzes the supply and attractiveness of this platform from a dynamic and spatial point of view. It aims to better understand the nature of the offer and of the providers, the seasonality of the occupation, the nature of the territories where it occurs, its synamics compared to other types of accommodation, and how it is distributed in Nice, the second French destination after Paris. This work obtained the support of the Regional Council and was realised by a team from La Maison des Sciences de l'Homme et de la Société Sud-Est, the GREDEG, and the École Universitaire de Recherche ELMI, essentially on the AIRDNA database.
    Abstract: Ce rapport a pour objet d'identifier les changements apportés par les plateformes de réservation de location de court terme à l'hébergement touristique en Provence Alpes Côte d'Azur. Il porte sur l'exploitation des données de la plateforme Airbnb, leader du secteur au niveau mondial et régional dont il analyse l'offre, l'attractivité d'un point de vue dynamique et spatial. Il à mieux comprendre quelle est la nature de l'offre et des offreurs, quelle est la saisonnalité de l'occupation, quelle est ,nature des territoires où elle se manifeste, quel est sa progression comparée à celle d'autres types d'hébergements, comment elle se répartit sur le territoire de Nice, seconde destination française après Paris. Ce travail a été mené avec le support du Conseil Régional par une équipe de la Maison des Sciences de l'Homme et de la Société Sud-Est, du GREDEG et de l'École Universitaire de Recherche ELMI, essentiellement sur la base de données AIRDNA.
    Keywords: Toursim economics,platforms,short term rentals,Airbnb,French Riviera
    Date: 2021–03–31
  11. By: Maxim Ananyev,; Michael Poyker; Yuan Tian
    Abstract: This chapter describes the growing literature on the effects of media on Covid-19-related outcomes. First, we discuss the papers related to traditional media. In particular, we discuss the literature that studies the effect of public messages, misinformation, and slanted media on health behaviors and health outcomes. Second, we discuss papers that highlight the role of social media content and social media users’ networks in the spread of information, formation of social norms, and transmission of diseases. We conclude with a discussion of how the pandemic, in turn, shapes the media.
    Keywords: COVID-19, Information Transmission, Media, Social Learning.
    Date: 2021
  12. By: Catherine Robinson; Christian Siegel; Sisi Liao
    Abstract: Does the successful deployment of digital technologies require complementary investment in skills? We conducted a pilot survey to investigate. The survey elicited information on whether the firm was adopting one of the three digital technologies of interest (AI, robotics, big data), provided in-house training, and whether they experienced any problems recruiting workers. We find evidence that new technologies require complementary skill investments and that firms deem both new technologies and training of their workforce important for productivity. While there is some heterogeneity across the type of technologies (Robotics, AI, Big Data) introduced, firms facing difficulties attracting workers with the right skills are more likely to run own training programmes. This might suggest that there is a skills gap that may be holding back productivity and economic growth. Overall, the findings from our pilot survey demonstrate firms's awareness of the need for skills to complement new technologies to realise the productivity benefits in full.
    Keywords: capital-skill complementarity; business performance; technology adoption
    JEL: J24 M53 O33
    Date: 2021–12
  13. By: Hasan, Iftekhar; Li, Xiang
    Abstract: This paper studies whether and how banks' technology adoption affects the bank lending channel of monetary policy transmission. We construct a new measurement of bank-level technology adoption, which can tell whether the technology is related to the bank's lending business and which specific technology is adopted. We find that lending-related technology adoption significantly strengthens the transmission of the bank lending channel, meanwhile, adopting technologies that are not related to lending activities significantly mitigates that. By technology categories, the adoption of cloud computing technology displays the largest impact on strengthening the bank lending channel. Moreover, higher exposure to BigTech competition is significantly associated with a weaker reaction to monetary policy shocks.
    Keywords: bank lending channel,monetary policy transmission,technology adoption
    JEL: G21 G23
    Date: 2021
  14. By: Omang O. Messono (University of Douala, Douala, Cameroon); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: This study examines the effects of the historical prevalence of infectious diseases on contemporary entrepreneurship. Previous studies reveal the persistence of the effects of historical diseases on innovation, through the channel of culture. Drawing on the epidemiological origin of institutions, we propose a framework which argues that the impact of infectious disease prevalence on contemporary entrepreneurship is mediated by property rights. The central hypothesis posits that a guarantee of property rights reduces the effect of past diseases on entrepreneurship. Using data from 125 countries, we find strong and robust evidence on the proposed hypothesis and other results. Property rights are higher in countries where the prevalence of diseases was low, which leads to good entrepreneurship scores. In contrast, countries with high disease prevalence did not have time to develop strong institutions to secure property rights. This explains their low level of entrepreneurship today. These results are robust to alternative methods and measures of property rights. Furthermore, our results also confirm the level of development, culture and the digitalization of economies as transmission channels between past diseases and the current level of entrepreneurship.
    Keywords: entrepreneurship; institutions; diseases; property rights
    JEL: I0 J24 I21 I31
    Date: 2021–09
  15. By: Bastien Baldacci; Philippe Bergault
    Abstract: With the fragmentation of electronic markets, exchanges are now competing in order to attract trading activity on their platform. Consequently, they developed several regulatory tools to control liquidity provision / consumption on their liquidity pool. In this paper, we study the problem of an exchange using incentives in order to increase market liquidity. We model the limit order book as the solution of a stochastic partial differential equation (SPDE) as in [12]. The incentives proposed to the market participants are functions of the time and the distance of their limit order to the mid-price. We formulate the control problem of the exchange who wishes to modify the shape of the order book by increasing the volume at specific limits. Due to the particular nature of the SPDE control problem, we are able to characterize the solution with a classic Feynman-Kac representation theorem. Moreover, when studying the asymptotic behavior of the solution, a specific penalty function enables the exchange to obtain closed-form incentives at each limit of the order book. We study numerically the form of the incentives and their impact on the shape of the order book, and analyze the sensitivity of the incentives to the market parameters.
    Date: 2021–12

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