nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2022‒06‒27
27 papers chosen by

  1. Embedded Supervision: How to Build Regulation into Decentralised Finance By Raphael A. Auer
  2. A Multivariate Hawkes Process Model for Stablecoin-Cryptocurrency Depegging Event Dynamics By Connor Oxenhorn
  3. “PayPal is not Coming Soon”. Why? By Abdul Jalil
  4. Cross Cryptocurrency Relationship Mining for Bitcoin Price Prediction By Panpan Li; Shengbo Gong; Shaocong Xu; Jiajun Zhou; Yu Shanqing; Qi Xuan
  5. Structural relationships between cryptocurrency prices and monetary policy indicators By Jennifer Castle; Takamitsu Kurita
  6. Relational platform entrepreneurs: live commerce and the 818 Jiazu By Lu, Isabel Fangyi; Wang, Lili
  7. Payment Habits of the Hungarian Households in 2020 By Vivien Deak; Istvan Nemecsko; Tamas Vegso
  8. Deceptive Features on Platforms By Johnen, Johannes; Somogyi, Robert
  9. Financial Literacy and Cash Holdings in Turkey By Mustafa Recep Bilici; Saygin Cevik
  10. The larger compensation for miners, the higher positive effect on the financial performance of cryptocurrencies By Élise Alfieri; Yann Ferrat
  11. Key factors for the emergence of innovative Paytech companies in Morocco: Innovation in mobile payment applications for Digital Wallets By Mohammed Eddaou
  12. Going Cashless: Government’s Point Reward Program vs. COVID-19 By Toshitaka Sekine; Toshiaki Shoji; Tsutomu Watanabe
  13. Safe-haven Effectiveness of Cryptocurrency: Evidence from Stock Markets of COVID-19 worst-hit African Countries By Raifu, Isiaka Akande; Ogbonna, Ahamuefula E
  14. Estudio sobre las condiciones de competencia en el sector de la publicidad online en España By Subdirección de Estudios, Departamento de Promoción de la Competencia
  15. Mandating Digital Tax Tools as a Response to Covid: Evidence from Eswatini By Santoro, Fabrizio; Amine, Razan; Magongo, Tanele
  16. Time-Varying Causality Between Bitcoin and Attention to COVID-19 News: Cultural Grouping By Huaxin Wang-Lu
  17. Retail CBDC and U.S. Monetary Policy Implementation: A Stylized Balance Sheet Analysis By Matthew Malloy; Francis Martinez; Mary-Frances Styczynski; Alex Thorp
  18. Strategic Pricing, Lifespan Choices and Environmental Implications of Peer-to-Peer Sharing By Francisco J. André; Carmen Arguedas; Sandra Rousseau
  19. Evaluating the Impact of Bitcoin on International Asset Allocation using Mean-Variance, Conditional Value-at-Risk (CVaR), and Markov Regime Switching Approaches By Mohammadreza Mahmoudi
  20. Fighting for Fares: Uber and the Declining Market Price of Licensed Taxicabs By Alina Garnham; Derek G. Stacey
  21. Advancing European internal and external digital sovereignty: The Brussels effect and the EU-US Trade and Technology Council By Bendiek, Annegret; Stürzer, Isabella
  22. Revisiting the EU cybersecurity strategy: A call for EU cyber diplomacy By Bendiek, Annegret; Kettemann, Matthias C.
  23. Risk in the Crypto Markets: a speech at the SNB-CIF Conference on Cryptoassets and Financial Innovation, Zürich, Switzerland, June 3, 2022 By Christopher J. Waller
  24. Regulating stochastic clocks By Zhe Fei; Weixuan Xia
  25. Real Effects of Stabilizing Private Money Creation By Chenzi Xu; He Yang
  26. My browser is not a billboard: Experimental evidence on ad-blocking adoption and users' acquisition of information By Fourberg, Niklas; Taş, Serpil; Wiewiorra, Lukas
  27. Understanding Financial Inclusion in Mongolia from a Micro Perspective: Is There a Gender Gap? By Enerelt Murakami

  1. By: Raphael A. Auer
    Abstract: The emergence of so-called “decentralised finance” (DeFi) and a shadow financial system of cryptocurrency exchanges and stablecoin issuers raises the challenge of how to apply technology-neutral regulation so that similar risks are subject to the same rules. This paper makes the case for embedded supervision, ie a regulatory framework that provides for compliance in decentralised markets to be automatically monitored by reading the market’s ledger. This reduces the need for firms to actively collect, verify and deliver data. The paper explores the conditions under which distributed ledger data may be used to monitor compliance. To this end, a decentralised market is modelled that replaces today’s intermediary-based verification of legal data with blockchain-enabled credibility based on economic consensus. The key results set out the conditions under which the market’s economic consensus would be strong enough to guarantee that transactions are economically final, so that supervisors can trust the distributed ledger’s data. The paper concludes with a discussion of the legislative and operational requirements that would promote low-cost supervision and a level playing field for small and large firms.
    Keywords: decentralised finance, DeFi, tokenisation, asset-backed tokens, stablecoins, crypto-assets, cryptocurrencies, CBDC, regtech, suptech, regulation, supervision, Basel III, proportionality, blockchain, distributed ledger technology, digital currencies, proof
    JEL: D40 D20 E42 E51 F31 G12 G18 G28 G32 G38 K22 K24 L10 L50 M40
    Date: 2022
  2. By: Connor Oxenhorn
    Abstract: Stablecoins, digital assets pegged to a specific currency or commodity value, are heavily involved in transactions of major cryptocurrencies. The effects of deviations from their desired fixed values (depeggings) on the cryptocurrencies for which they are frequently used in transactions are therefore of interest to study. We propose a model for this phenomenon using a multivariate mutually-exciting Hawkes process, and present a numerical example applying this model to Tether (USDT) and Bitcoin (BTC).
    Date: 2022–05
  3. By: Abdul Jalil (Pakistan Institute of Development Economics)
    Abstract: PayPal is a US-based electronic payment system that acts as a third party for financial payments between two parties. After signing up for the PayPal platform, the customer is supposed to link PayPal with their debit card, credit card or bank account. After completing the procedure, the customer may receive and send money to/from their cards or bank accounts.
    Keywords: Paypal
    Date: 2021
  4. By: Panpan Li; Shengbo Gong; Shaocong Xu; Jiajun Zhou; Yu Shanqing; Qi Xuan
    Abstract: Blockchain finance has become a part of the world financial system, most typically manifested in the attention to the price of Bitcoin. However, a great deal of work is still limited to using technical indicators to capture Bitcoin price fluctuation, with little consideration of historical relationships and interactions between related cryptocurrencies. In this work, we propose a generic Cross-Cryptocurrency Relationship Mining module, named C2RM, which can effectively capture the synchronous and asynchronous impact factors between Bitcoin and related Altcoins. Specifically, we utilize the Dynamic Time Warping algorithm to extract the lead-lag relationship, yielding Lead-lag Variance Kernel, which will be used for aggregating the information of Altcoins to form relational impact factors. Comprehensive experimental results demonstrate that our C2RM can help existing price prediction methods achieve significant performance improvement, suggesting the effectiveness of Cross-Cryptocurrency interactions on benefitting Bitcoin price prediction.
    Date: 2022–04
  5. By: Jennifer Castle; Takamitsu Kurita
    Abstract: The rapid expansion of the global cryptocurrency market raises the question of whether there are stable relationships between the prices of representative cryptocurrencies and economic indicators capturing expectations of future monetary policy. In this paper multivariate time-series analysis reveals a single but significant cointegrating relationship between cryptocurrencies and the term spread. This evidence reveals direct policy implications for the implementation of monetary policy allowing for the growing influence of digital assets. While the cointegrating linkage plays a critical role in modelling cryptocurrencies in sample, it contributes little to forecasting them out of sample, thus indicating potential efficiency in the digital currency market.
    Date: 2022–06–08
  6. By: Lu, Isabel Fangyi; Wang, Lili
    Abstract: This paper explores the emerging platform entrepreneurship through an observational case study of one of the most prominent Kuaishou influencers, Xin Youzhi, and his 818 jiazu. Jiazus are influencer communities on Kuaishou, a Chinese livestreaming and e-commerce platform. Examining platform entrepreneurs through a relational lens, we illustrate the organisation and operation of the 818 jiazu and its interaction with the followers, the Kuaishou platform and the Chinese state. Identifying relations of mutuality, autonomy and domination, we find that 818 kiazu’s rise and fall manifest the relationality and contingency of entrepreneurial labours in the Chinese platform economy. We argue that Kuaishou jiazu can be understood as relational entrepreneurs who need new sociotechnical skills to navigate various relationships with the platform, users and state regulations. Our study contributes to understanding the organisation and practices of livestreamers by foregrounding the entrepreneurial agency of the influencer community.
    Keywords: China; digital entrepreneurs; digital labour; Jiazu; Kuaishou; performative labour; platform governance; relational; relational labour
    JEL: R14 J01
    Date: 2022–04–26
  7. By: Vivien Deak (Magyar Nemzeti Bank (Central Bank of Hungary)); Istvan Nemecsko (Magyar Nemzeti Bank (Central Bank of Hungary)); Tamas Vegso (Magyar Nemzeti Bank (Central Bank of Hungary))
    Abstract: In our study, we analyse the payment habits of the Hungarian population based on data from a representative questionnaire survey conducted in autumn 2020 using basic statistical methods, regression analysis and cluster analysis. Our results show that at least 90 per cent of households in Hungary have at least one bank account or payment card. Overall coverage is high and falls significantly short of 100 per cent only for the over-60s , so this is not a major barrier to further adoption of electronic payments. Although in decreasing proportions, cash incomes are still present in the Hungarian economy today, especially for those performing manual labour and entrepreneurial activities. In European comparison, Hungarians withdraw cash fewer times, but in significantly larger amounts, and the possibility of free cash withdrawals twice a month is likely to have had a strong influence on the consolidation of this practice. Around 80 per cent of the population use electronic payments, a proportion that is steadily increasing, but at the same time almost all citizens still use cash, too. An important change compared to previous data is that the share of people using electronic payments to pay their utility bills now exceeds the share of people using cash, and the same is true for online purchases. The use of, and choice between, different payment methods is most influenced by different socio-demographic factors (age, education, employment status, household income per capita), transaction situation and the perceived cost of each payment method to consumers. The coronavirus pandemic and the restrictions it imposed increased the use of electronic payment methods even further, but cash still remained the most commonly used means of payment during this period. In the future, the mandatory acceptance of electronic payments for online cash register users from 1 January 2021 and the emergence of user-friendly, low-cost applications based on instant payments are expected to further support the growth of electronic payments. However, for certain demographic groups, cash use may remain dominant even in the long term.
    Keywords: retail payments, payment habits, household behaviour, electronic payment methods, financial integration
    JEL: C38 D12 D14 E42
    Date: 2022
  8. By: Johnen, Johannes (Université catholique de Louvain, LIDAM/CORE, Belgium); Somogyi, Robert (Université catholique de Louvain, LIDAM/CORE, Belgium)
    Abstract: Many products sold on online platforms have additional features. Platforms can deliberately shroud these features from consumers, e.g. by revealing them only late in the purchase process. For example, platforms often reveal fees for shipping, handling, extra luggage or hotel services only late in the purchase process. We study when a two-sided platform discloses (a.k.a unshrouds) additional fees when some buyers naively ignore shrouded fees. We uncover a novel mechanism to explain why platforms shroud: platforms shroud or unshroud to manipulate cross-group externalities between buyers and sellers. Exploring this mechanism, we highlight two results suggesting online marketplaces lead to more shrouded features. First, we ask when a platform shrouds seller fees on its marketplace. Driven by cross-group network externalities to attract buyers and appear cheap, the platform has stronger incentives to shroud seller fees than sellers themselves. Second, we investigate when the platform shrouds its own additional fees and uncover a perverse effect of seller competition: fiercer competition between sellers encourages the platform to shroud its own fees. Both results hold even though the platform earns no commission to shroud seller fees and does not sell its own brands, so banning these practices will not induce a transparent marketplace. We discuss further policy implications and connect to common practices like drip pricing, steering, and rebate design.
    Date: 2022–04–13
  9. By: Mustafa Recep Bilici; Saygin Cevik
    Abstract: This paper examines the effect of financial literacy level on cash holdings in Turkey. Utilizing the Methods of Payment Survey, which includes both financial literacy and cash-related data, we first investigate the fundamentals of financial literacy in Turkey. Based on the performance on financial literacy questions, we categorize respondents into three groups. Subsequently, we analyze how cash holding behavior differs among financial literacy groups. Our results reveal that financially literate respondents tend to hold less cash on hand and store more cash elsewhere. Moreover, card ownership increases through financial literacy and the change in payment behavior of financially literate respondents is more significant during Covid-19 pandemic. The results imply that promoting financial literacy may result in less cash usage at points of sale accompanied by the currency in circulation growth, due to the overwhelming effect of increased non-transactional demand following a positive change in financial literacy level.
    Keywords: Financial literacy, Money demand, Cash demand
    JEL: C50 E41 G53
    Date: 2022
  10. By: Élise Alfieri (IRG - Institut de Recherche en Gestion - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel); Yann Ferrat (CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes, OFI Asset Management)
    Abstract: To cope with the weakened financial system, the innovative ecosystem of cryptocurrencies and the blockchain seem to emerge as alternative solutions. While they offer a decentralized governance, cryptocurrencies also provide exposure to social dimensions. We thus pose the following research question: is there a virtuous circle between extra-financial and financial performance for cryptocurrencies? To answer this question, we analyze the social performance, an extra-financial dimension, through miners' compensation. Using a sample of cryptocurrencies between 2015 and 2021, we follow two econometric modeling approaches, namely portfolios constituted based on miner compensation and a panel regression model. This dual approach allows an analysis of the relationship at the macro and microeconomic level as well as enhancing the robustness of our inferences. Our results show that the social and financial performance relationship is positive. Thus, enhanced value sharing in the cryptocurrency landscape appears synonymous of greater financial performance.
    Abstract: Pour faire face au système financier fragilisé, l'écosystème innovant des cryptomonnaies et de la blockchain semble être une alternative. En plus d'une gouvernance décentralisée, les cryptomonnaies offrent une exposition aux dimensions sociales. Nous posons ainsi la question suivante : existe-t-il un cercle vertueux entre performance extra-financière et financière pour les cryptomonnaies ? Nous analysons ainsi la performance sociale, une dimension extra-financière, à travers la rémunération des mineurs. En utilisant un échantillon de cryptomonnaies entre 2015 et 2021, nous réalisons une analyse de portefeuille constitué en fonction de la rémunération des mineurs et utilisons un modèle en données de panel.Cette double approche permet d'étudier la relation à l'échelle macro et microéconomique, renforçant la robustesse des inférences. Nos résultats montrent que la relation performance sociale et boursière est positive. Ainsi, un partage de la valeur ajoutée accrue pour une cryptomonnaie semble être synonyme de performance financière plus élevée.
    Keywords: Bitcoin,Cryptomonnaies,Partage de la valeur ajoutée,Performance sociale,Rendements boursiers
    Date: 2022–04–04
  11. By: Mohammed Eddaou (Université Mohammed Premier [Oujda])
    Abstract: Morocco has seen a galloping increase in digital wallets since the introduction of this mobile solution in 2018. However, the period from 2015 to 2020 is marked by a downward trend in the creation of innovative ICT companies. In the context of this article, and in order to explain this reality, we will try to answer the following question: What is the relationship between the key factors of creation of new technological firms and the emergence of innovative Paytech companies in Morocco? To answer our central question, we have used scientific realism as an epistemological position, and the hypothetico-deductive approach as a research approach. In order to study our research hypotheses, we constructed a sample of 30 individuals working with actors of the ecosystem of these companies. In order to carry out the empirical analysis of our conceptual research model, we used cross-sectional data regression. The results of the study show that the emergence of innovative Paytech companies in Morocco is linked to the importance of the external network actors facilitated by the incubators and to the access of the founders of innovative Paytech companies to bank loans.
    Abstract: Le Maroc a connu une augmentation galopante des Digital Wallets depuis la mise en place de cette solution mobile en l'année 2018. Cependant, la période allant de 2015 à 2020 est marquée par une tendance à la baisse de la création des entreprises innovantes en TIC. Dans le cadre de cet article, et pour apporter une explication à cette réalité, nous essayerons de répondre à la question suivante : Quelle relation entre les facteurs clés de création des nouvelles firmes technologiques et l'éclosion des entreprises innovantes en Paytech au Maroc ? Pour répondre à notre question centrale, nous avons eu recours au réalisme scientifique en tant que positionnement épistémologique, et la démarche hypothético-déductive en tant que démarche de recherche. En vue d'étudier nos hypothèses de recherche, nous avons construit un échantillon de 30 individus travaillant auprès des acteurs de l'écosystème de ces entreprises. Pour réussir l'analyse empirique de notre modèle conceptuel de recherche, nous avons eu recours à une régression de données en coupe instantanée. Les résultats de l'étude montrent que l'éclosion des entreprises innovantes en Paytech au Maroc est liée à l'importance des acteurs des réseaux externes favorisés par les incubateurs et à l'accès des fondateurs des entreprises innovantes en Paytech aux prêts bancaires.
    Keywords: innovative entrepreneur,venture capital,Incubators,Fintech,Paytech,Innovative companies,entrepreneur innovateur,Entreprises innovantes,capital-risque
    Date: 2022–04
  12. By: Toshitaka Sekine (Hitotsubashi University); Toshiaki Shoji (Seikei University); Tsutomu Watanabe (University of Tokyo)
    Abstract: Using credit card transaction data, we examine the impacts of two successive events that promoted cashless payments in Japan: the government’s program and the COVID-19 pandemic. We find that the number of card users was 9-12 percent higher in restaurants that participated in the program than those that did not. We present a simple framework accounting for the spread of cashless payments. Our model predicts that the impact of the policy intervention diminished as the use of cashless payments increased, which accords well with Japan’s COVID-19 experience. The estimated impact of COVID-19 was around two-thirds of that of the program.
    Date: 2022–06
  13. By: Raifu, Isiaka Akande; Ogbonna, Ahamuefula E
    Abstract: The study assessed the hedge or safe-haven property of five cryptocurrencies for stocks of three COVID-19 worst-hit African countries. We address two main concerns bordering on the predictive capacity of African stocks for cryptocurrency returns, and the safe-haven property that cryptocurrencies could offer to African stocks. A distributed lag model, with explicitly incorporated salient statistical features, was adopted based its efficient management of parameter proliferation and estimation biases. We ascertained the model’s in-sample predictability and evaluate its out-of-sample forecasts performance in comparison with historical average model, using Clark and West statistics. While African stocks significantly predicted cryptocurrency returns, the cryptocurrency-stocks nexus revealed the diversifier and safe-haven property of cryptocurrencies for African stocks in periods of normalcy and crisis/pandemic, respectively. Our predictive model outperformed the historical average model in the out-of-sample. Our results may be sensitive to cryptocurrency-stocks nexus, sample periods but not the out-of-sample forecast horizons.
    Keywords: COVID-19; Cryptocurrency; Distributed Lag Model; Hedge; Safe-Haven
    JEL: C51 C58 G11
    Date: 2021–01–19
  14. By: Subdirección de Estudios, Departamento de Promoción de la Competencia (Comisión Nacional de los Mercados y la Competencia (CNMC))
    Abstract: El estudio analiza la condiciones de competencia en el sector de la publicidad online en España y ofrece una serie de recomendaciones para mejorar el funcionamiento de este mercado desde la óptica de la competencia y la regulación eficiente. La publicidad online es clave para la competencia pues permite a los anunciantes llegar a sus consumidores. Además, es la principal fuente de financiación del contenido en internet y constituye una de las vías de ingresos más importantes para las grandes plataformas digitales. Un funcionamiento más competitivo del sector de la publicidad favorecerá que empresas nacientes o innovadoras comuniquen mejor sus mensajes. Eso incrementará la eficiencia de toda la economía, pues se empodera a empresas y consumidores con mayor capacidad de elección para tomar decisiones óptimas.
    Keywords: Competencia, Publicidad online, Publicidad digital, Digitalización, Datos, Regulación
    JEL: L40 K21 L82 L86
    Date: 2021–07–07
  15. By: Santoro, Fabrizio; Amine, Razan; Magongo, Tanele
    Abstract: Many tax authorities changed the mode of interacting with taxpayers from physical to online as a response to the Covid-19 pandemic, to diminish the spread of the virus. Eswatini, the country under study, mandated the use of online tax filing through the e-Tax system for all income tax payers, coupled with a zero-cash-handling policy for tax payment. By means of a difference-in-difference (DID) strategy, reinforced by a propensity score matching (PSM), this paper offers an impact evaluation of the mandate on taxpayer filing and payment behaviour. We present three sets of results. First, we describe which firms are most likely to register for e-Tax – mostly large firms and those in the primary and tertiary sectors. Second, we show that e-Tax uptake significantly improves filing behaviour, as well as payment behaviour. E-Tax registered taxpayers are less likely to file nil (by 60 per cent), declare more turnover and taxable income, and are 70 per cent more likely to pay conditional on filing. Third, we shed light on the mechanisms behind our main findings, showing that the technology improved accuracy and reduced compliance costs. E-Tax-registered treated taxpayers are more likely to file on time, file for VAT, report more accurately, and, on the payment side, to pay their liabilities in full.
    Keywords: Governance,
    Date: 2022
  16. By: Huaxin Wang-Lu
    Abstract: The pandemic and people's concern over it are associated with the Bitcoin market, while the extent of individualism differentiates how individuals regard and react to the viral spread and corresponding measures. This paper examines if real-time attention to country-specific COVID-19 news Granger causes daily Bitcoin returns and trading volumes between February 13, 2020 and April 04, 2022, and whether the causal relationship varies time-wise between the collectivistic and individualistic country group. Results show different timing and spans of the causality. In general, attention to COVID-19 news of the individualistic cluster presents stronger evidence of causal effects on both Bitcoin returns and trading volumes.
    Date: 2022–05
  17. By: Matthew Malloy; Francis Martinez; Mary-Frances Styczynski; Alex Thorp
    Abstract: This paper discusses how a Federal Reserve issued retail central bank digital currency (CBDC) could affect U.S. monetary policy implementation. Using a stylized balance sheet analysis, we analyze the effect a retail CBDC could have on the balance sheets of the Federal Reserve, commercial banks, and U.S. households. Then we consider how these balance sheet changes could affect monetary policy implementation for the Federal Reserve. We illustrate that the potential effects on monetary policy implementation from a retail CBDC are highly dependent on the initial conditions of the Federal Reserve’s balance sheet. Moreover, the analysis demonstrates how the Federal Reserve may use its existing tools to manage the effects of a retail CBDC on monetary policy implementation.
    Keywords: Bank behavior; Central banking; Households; Monetary policy implementation; Retail CBDC
    Date: 2022–05–31
  18. By: Francisco J. André (Dpt. Economic Analysis and ICE, Universidad Complutense de Madrid); Carmen Arguedas (Dpt. Economic Analysis, Autonomous University of Madrid); Sandra Rousseau (Faculty of Economics and Business, KU Leuven)
    Abstract: Peer-to-peer sharing has become increasingly popular in recent years. Many digital platforms exist that allow individuals to use others’ belongings part-time. These platforms explicitly mention their green credentials, as the environmental benefits of such sharing initiatives are often taken for granted. However, several recent empirical studies show evidence of the contrary. For the first time in the literature, we provide a theoretical framework to analyze the economic and environmental implications of peer-to-peer sharing. We present a stylized model where a monopolist supplies a product that is suitable for rent on a sharing platform. Counterintuitively, we find that the existence of such a platform is typically beneficial for the monopolist, especially if it can strategically choose the price and lifespan of the product to affect the use price in the sharing market. Such a scenario is not at all beneficial for consumers, especially for those who rent the good rather than buy it. Moreover, the existence of the sharing platform induces higher use and (under some likely conditions) larger production levels and shorter lifespans of the products. The combination of these three aspects contributes to a worse environmental impact with sharing, which provides a theoretical rationale for the aforementioned empirical studies.
    Keywords: peer-to-peer sharing; environmental externalities; strategic pricing; strategic lifespan.
    JEL: D16 D21 D62 L12 Q56
    Date: 2022–05–31
  19. By: Mohammadreza Mahmoudi
    Abstract: This paper aims to analyze the effect of Bitcoin on portfolio optimization using mean-variance, conditional value-at-risk (CVaR), and Markov regime switching approaches. I assessed each approach and developed the next based on the prior approach's weaknesses until I ended with a high level of confidence in the final approach. Though the results of mean-variance and CVaR frameworks indicate that Bitcoin improves the diversification of a well-diversified international portfolio, they assume that assets' returns are developed linearly and normally distributed. However, the Bitcoin return does not have both of these characteristics. Due to this, I developed a Markov regime switching approach to analyze the effect of Bitcoin on an international portfolio performance. The results show that there are two regimes based on the assets' returns: 1- bear state, where returns have low means and high volatility, 2- bull state, where returns have high means and low volatility.
    Date: 2022–04
  20. By: Alina Garnham; Derek G. Stacey (Queen's University)
    Abstract: In this paper, we study how the emergence of Uber in a large North American city affects the financial value of taxicab licenses. A taxicab license provides a claim to a stream of dividends in the form of rents generated by operating the taxicab or leasing the license. The introduction of Uber undoubtedly affects the anticipated stream of dividends because Uber drivers capture part of the farebox revenue that might otherwise go to the owners/drivers of licensed taxicabs. At the same time, the launch of Uber's innovative technology-driven approach to the provision of ride-hailing services can be viewed as a partial obsolescence of the traditional taxicab approach. The economic incentives facing market participants may therefore change as Uber gains momentum in the ride-hailing market, which could further affect the market value of licensed taxicabs. Using transaction-level data, we apply a theory of asset pricing to the secondary market for Toronto taxicab licenses to explore these potential price effects. We learn that both the farebox and innovation effects contribute to the overall decline in market value, with the farebox effect accounting for just over half of the $170K price decline from 2011 to 2017. We explore the welfare implications for taxicab license owners with counterfactual simulations. We find that, consistent with the anti-Uber protests organized by Toronto taxi drivers, there was a high willingness to pay among license holders to prevent or postpone the launch of Uber's ridesharing services.
    Keywords: Uber , Taxicabs , Asset Pricing , Search and Bargaining
    JEL: G12
    Date: 2022–06
  21. By: Bendiek, Annegret; Stürzer, Isabella
    Abstract: Given the strong economic interdependencies between the United States (US) and Europe as well as the shared commitment to safeguard civil liberties online and combat disinformation and unfair market practices, European Union (EU) cooperation with the US on digital markets is crucial. Thus, the EU-initiated transatlantic Trade and Technology Council (TTC) was established to navigate European and American understandings of 'digital sovereignty' and the resulting market regulations. The first TTC meeting took place in September 2021 and demonstrated both a shared commitment to building an alliance on 'democratic technology' and diverging ideas on how to best regulate the digital market and its biggest players. As the COVID-19 pandemic has revealed vulnerabilities of international supply chains and accelerated digitalisation, European policymakers are well-advised to continue pursuing their digital foreign policy strategy of advancing digital sovereignty by leveraging the 'Brussels effect', which also fosters the further integration of EU digital policy and contributes to the deepening of the transatlantic digital market.
    Date: 2022
  22. By: Bendiek, Annegret; Kettemann, Matthias C.
    Abstract: In December 2020, the European Union (EU) presented its new strategy on cybersecurity with the aim of strengthening Europe's technological and digital sovereignty. The document lists reform projects that will link cybersecurity more closely with the EU's new rules on data, algorithms, markets, and Internet services. However, it clearly falls short of the development of a European cyber diplomacy that is committed to both 'strategic openness' and the protection of the digital single market. In order to achieve this, EU cyber diplomacy should be made more coherent in its supranational, demo­cratic, and economic/technological dimensions. Germany can make an important contribution to that by providing the necessary legal, technical, and financial resources for the European External Action Service (EEAS).
    Date: 2021
  23. By: Christopher J. Waller
    Date: 2022–06–03
  24. By: Zhe Fei; Weixuan Xia
    Abstract: Stochastic clocks represent a class of time change methods for incorporating trading activity into continuous-time financial models, with the ability to deal with typical asymmetrical and tail risks in financial returns. In this paper we propose a significant improvement of stochastic clocks for the same objective but without decreasing the number of trades or changing the trading intensity. Our methodology targets any L\'{e}vy subordinator, or more generally any process of nonnegative independent increments, and is based on various choices of regulating kernels motivated from repeated averaging. By way of a hyperparameter linked to the degree of regulation, arbitrarily large skewness and excess kurtosis of returns can be easily achieved. Generic-time Laplace transforms, characterizing triplets, and cumulants of the regulated clocks and subsequent mixed models are analyzed, serving purposes ranging from statistical estimation and option price calibration to simulation techniques. Under specified jump-diffusion processes and tempered stable processes, a robust moment-based estimation procedure with profile likelihood is employed for statistical estimation and a comprehensive empirical study involving S\&P500 and Bitcoin daily returns is conducted to demonstrate a series of desirable effects of the proposed methods.
    Date: 2022–04
  25. By: Chenzi Xu; He Yang
    Abstract: We show that decentralized privately created money with unstable values can hinder the traded, more transaction-friction sensitive, sector of the economy. We do so in the context of the NationalBanking Act of 1864 in the United States that created a new federally-regulated, fully-backed currency as an alternative to the pre-existing money supply, which consisted of unsecured notes printed by thousands of local private banks. Using a discontinuous change across towns in the costs of accessing this new type of stable, federally-backed money as a natural experiment, we show that places gaining access to the new currency experienced a shift in the composition of agricultural production from non-traded to traded goods and increased employment in trade-related professions. In addition, counties gaining access to the new stable money increased their manufacturing output by sourcing more inputs, and they innovated more, all consistent with the stable currency improving their market access and allowing them to expand through trade.
    JEL: E42 E44 E51 F14 G21 N11 N21
    Date: 2022–05
  26. By: Fourberg, Niklas; Taş, Serpil; Wiewiorra, Lukas
    Abstract: Ad-avoidance technologies such as ad-blocking add-ons in browsers and supplemental mobile applications have become mainstream tools in recent years. Over time they surpassed their niche role as applications only for the technically savvy and became an essential tool for many internet users. While the technical impact of these tools has been well researched, their effects on actual consumer behavior is still unclear. In an experimental setting this study provides first evidence on the effect of ad-blocking on users' ability to acquire information in the form of an online reading task. We find that ad-blocking leads to more effort being exerted and increases social welfare by reducing inefficient searching. Additionally, ad-blocking induces users' visit duration on websites to be more elastic in the experienced intensity of advertisement. Hence, gains in user visit duration from reducing the ad-load are larger, which consequences a more competitive environment among publishers. The results provide new perspectives on ad-blocking and inform the current debate on looming ad-tech regulations in the light of DMA and DSA initiatives.
    Keywords: ad-blocking,consumer behavior,lab experiment,online advertising,welfare,privacy
    JEL: L82 L86 M37 C91
    Date: 2021
  27. By: Enerelt Murakami
    Abstract: This paper investigates the determinants of financial inclusion in Mongolia – a country where persistent “reverse” gender gap in financial inclusion exists. When applying multivariate logistic models to nationally representative data, results show that women, and those who are more educated and older are more likely to be financially included. Women are four percentage points more likely than men to have access to formal finances; men are more likely to report barriers to finance and use informal finances. The Blinder-Oaxaca decomposition technique is employed to analyze the “reverse” gender disparity in financial inclusion. The results demonstrate that the disparity is largely due to coefficient effects that reflect behavioral or unobserved differences towards financial inclusion between men and women.
    Keywords: Financial inclusion, Gender, Mongolia
    Date: 2022–04

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