nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2022‒09‒05
nineteen papers chosen by

  1. Pattern Analysis of Money Flow in the Bitcoin Blockchain By Natkamon Tovanich; R\'emy Cazabet
  2. Social Media and the Behavior of Politicians: Evidence from Facebook in Brazil By Pedro Bessone; Filipe R. Campante; Claudio Ferraz; Pedro Souza
  3. Crypto Rewards in Fundraising: Evidence from Crypto Donations to Ukraine By Jane; Tan; Yong Tan
  4. Towards the holy grail of cross-border payments By Bindseil, Ulrich; Pantelopoulos, George
  5. Introducing New Forms of Digital Money: Evidence from the Laboratory By Gabriele Camera
  6. Multifractal cross-correlations of bitcoin and ether trading characteristics in the post-COVID-19 time By Marcin W\k{a}torek; Jaros{\l}aw Kwapie\'n; Stanis{\l}aw Dro\.zd\.z
  7. Application of machine learning models and interpretability techniques to identify the determinants of the price of bitcoin By José Manuel Carbó; Sergio Gorjón
  8. A global analysis of worker protest in digital labour platforms By Bessa, Ioulia,; Joyce, Simon,; Neumann, Denis,; Stuart, Mark,; Trappmann, Vera,; Umney, Charles,
  9. Mobile internet, skills and structural transformation in Rwanda By Caldarola, Bernardo.; Grazzi, Marco.; Occelli, Martina.; Sanfilippo, Marco.
  10. Does DeFi remove the need for trust? Evidence from a natural experiment in stablecoin lending By Kanis Saengchote; Talis Putni\c{n}\v{s}; Krislert Samphantharak
  11. Assortment Optimization with Customer Choice Modeling in a Crowdfunding Setting By Fatemeh Nosrat
  12. The Opportunities of Using the Metaverse from a Business Perspective By Radka Bauerová; OndÅ™ej Mikšík; Lucie Vavrušková; KateÅ™ina Gavendová; Veronika Haladejová; Pavel VavruÅ¡ka
  13. Nowcasting Chilean household consumption with electronic payment data By Marcus P. A. Cobb
  14. Pictures of a Revolution: Analyzing the Transition from Global Bimetallism to the Gold Standard in the 1860s and 1870s By Mr. Johannes Wiegand
  15. Social Protection and Social Distancing During the Pandemic: Mobile Money Transfers in Ghana By Dean Karlan; Matt Lowe; Robert Darko Osei; Isaac Osei-Akoto; Benjamin N. Roth; Christopher R. Udry
  16. Aftermarket Frictions and the Cost of Off-Platform Options in Centralized Assignment Mechanisms By Adam Kapor; Mohit Karnani; Christopher Neilson
  17. Early contributors, cooperation and fair rewards in crowdfunding By Alexandre Chirat; Guillaume Sekli
  18. Subprime empire: on the in-betweenness of finance By Schuster, Caroline; Kar, Sohini
  19. Cross-border financial centres By Pamela Pogliani; Philip Wooldridge

  1. By: Natkamon Tovanich; R\'emy Cazabet
    Abstract: Bitcoin is the first and highest valued cryptocurrency that stores transactions in a publicly distributed ledger called the blockchain. Understanding the activity and behavior of Bitcoin actors is a crucial research topic as they are pseudonymous in the transaction network. In this article, we propose a method based on taint analysis to extract taint flows --dynamic networks representing the sequence of Bitcoins transferred from an initial source to other actors until dissolution. Then, we apply graph embedding methods to characterize taint flows. We evaluate our embedding method with taint flows from top mining pools and show that it can classify mining pools with high accuracy. We also found that taint flows from the same period show high similarity. Our work proves that tracing the money flows can be a promising approach to classifying source actors and characterizing different money flow patterns
    Date: 2022–07
  2. By: Pedro Bessone; Filipe R. Campante; Claudio Ferraz; Pedro Souza
    Abstract: We study the relationship between the spread of social media platforms and the communication and responsiveness of politicians towards voters, in the context of the expansion of Facebook in Brazil. We use self-collected data on the universe of Facebook activities by federal legislators and the variation in access induced by the spread of the 3G mobile phone network to establish three sets of findings: (i) Politicians use social media extensively to communicate with constituents, finely targeting localities while addressing policy-relevant topics; (ii) They increase their online engagement, especially with places where they have a large pre-existing vote share; but (iii) They shift their offline engagement (measured by speeches and earmarked transfers) away from connected municipalities within their base of support. Our results suggest that, rather than increasing responsiveness, social media may enable politicians to solidify their position with core supporters using communication strategies, while shifting resources away towards localities that lag in social media presence.
    JEL: D72 H72 L86 L96
    Date: 2022–07
  3. By: Jane (Xue); Tan; Yong Tan
    Abstract: Extrinsic incentives such as a conditional thank-you gift have shown both positive and negative impacts on charitable fundraising. Leveraging the crypto donations to a Ukrainian fundraising plea that accepts Ether (i.e., the currency of the Ethereum blockchain) and Bitcoin (i.e., the currency of the Bitcoin blockchain) over a seven-day period, we analyze the impact of crypto rewards that lasted for more than 24 hours. Crypto rewards are newly minted tokens that are usually valueless initially and grow in value if the corresponding cause is well received. Separately, we find that crypto rewards have a positive impact on the donation count but a negative impact on the average donation size for donations from both blockchains. Comparatively, we further find that the crypto rewards lead to an 812.48% stronger donation count increase for Ethereum than Bitcoin, given that the crypto rewards are more likely to be issued on the Ethereum blockchain, which has higher programmability to support smart contracts. We also find a 30.1% stronger decrease in average donation amount from Ethereum for small donations ( $250). Our study is the first work to look into crypto rewards as incentives for fundraising. Our findings indicate that the positive effect of crypto rewards is more likely to manifest in donation count, and the negative effect of crypto rewards is more likely to manifest in donation size.
    Date: 2022–07
  4. By: Bindseil, Ulrich; Pantelopoulos, George
    Abstract: The holy grail of cross-border payments is a solution allowing cross-border payments to be immediate, cheap, universal, and settled in a secure settlement medium. The search for such a solution is as old as international commerce and the implied need to pay. This paper describes current visions how to eventually find this holy grail within the next decade, namely through (i) modernized correspondent banking; (ii) emerging cross-border FinTech solutions; (iii) Bitcoin; (iv) global stablecoins; (v) interlinked instant payment systems with FX conversion layer; (vi) interlinked CBDC with FX conversion layer. For each, settlement mechanics are explained, and an assessment is provided on its potential to be the holy grail of cross-border payments. Several solutions are suitable for improving cross-border payments significantly, and some could even be the holy grail. JEL Classification: E42, E58, F31
    Keywords: bitcoin, CBDC, correspondent banking, cross-currency payments, interlinking, stablecoins
    Date: 2022–08
  5. By: Gabriele Camera (Economic Science Institute, Chapman University)
    Abstract: Central banks may soon issue currencies that are entirely digital (CBDCs) and possibly interest-bearing. A strategic analytical framework is used to investigate this innovation in the laboratory, contrasting a traditional “plain†tokens baseline to treatments with “sophisticated†interest-bearing tokens. In the experiment, this theoretically beneficial innovation precluded the emergence of a stable monetary system, reducing trade and welfare. Similar problems emerged when sophisticated tokens complemented or replaced plain tokens. This evidence underscores the advantages of combining theoretical with experimental investigation to provide insights for payments systems innovation and policy design.
    Keywords: digital currency, endogenous institutions, repeated games, CBDC
    JEL: C70 C90
    Date: 2022
  6. By: Marcin W\k{a}torek; Jaros{\l}aw Kwapie\'n; Stanis{\l}aw Dro\.zd\.z
    Abstract: Unlike price fluctuations, the temporal structure of cryptocurrency trading has seldom been a subject of systematic study. In order to fill this gap, we analyse detrended correlations of the price returns, the average number of trades in time unit, and the traded volume based on high-frequency data representing two major cryptocurrencies: bitcoin and ether. We apply the multifractal detrended cross-correlation analysis, which is considered the most reliable method for identifying nonlinear correlations in time series. We find that all the quantities considered in our study show an unambiguous multifractal structure from both the univariate (auto-correlation) and bivariate (cross-correlation) perspectives. We looked at the bitcoin--ether cross-correlations in simultaneously recorded signals, as well as in time-lagged signals, in which a time series for one of the cryptocurrencies is shifted with respect to the other. Such a shift suppresses the cross-correlations partially for short time scales, but does not remove them completely. We did not observe any qualitative asymmetry in the results for the two choices of a leading asset. The cross-correlations for the simultaneous and lagged time series became the same in magnitude for the sufficiently long scales.
    Date: 2022–08
  7. By: José Manuel Carbó (Banco de España); Sergio Gorjón (Banco de España)
    Abstract: So-called cryptocurrencies are becoming more popular by the day, with a total market capitalization that exceeded $3 trillion at its peak in 2021. Bitcoin has emerged as the most popular among them, with a total valuation that reached an all-time high of $68,000 in November 2021. However, its price has historically been subject to large and abrupt fluctuations, as the sudden drop in the months that followed once again proved. Since bitcoin looks all set to continue growing while largely concentrating its activity in unregulated environments, concerns have been raised among authorities all over the world about its potential impact on financial stability, monetary policy, and the integrity of the financial system. As a result, building a sound and proper regulatory and supervisory framework to address these challenges hinges upon achieving a better understanding of both the critical underlying factors that influence the formation of bitcoin prices and the stability of such factors over time. In this article we analyse which variables determine the price at which bitcoin is traded on the most relevant exchanges. To this end, we use a flexible machine learning model, specifically a Long Short Term Memory (LSTM) neural network, to establish the price of bitcoin as a function of a number of economic, technological and investor attention variables. Our LSTM model replicates reasonably well the behaviour of the price of bitcoin over different periods of time. We then use an interpretability technique known as SHAP to understand which features most influence the LSTM outcome. We conclude that the importance of the different variables in bitcoin price formation changes substantially over the period analysed. Moreover, we find that not only does their influence vary, but also that new explanatory factors often seem to appear over time that, at least for the most part, were initially unknown.
    Keywords: Bitcoin, machine learning, LSTM, interpretability techniques
    JEL: C40 C45 G12 G15
    Date: 2022–04
  8. By: Bessa, Ioulia,; Joyce, Simon,; Neumann, Denis,; Stuart, Mark,; Trappmann, Vera,; Umney, Charles,
    Abstract: This paper presents findings from the Leeds Index of Platform Labour Protest, a database of platform worker protest events around the world which gathers data from online news media reports and other online sources. For the period January 2017 to July 2020, we identified 1,271 instances of worker protest in four platform sectors: ride-hailing, food delivery, courier services and grocery delivery. Our results show that the single most important cause of platform worker protest is pay, with other protested issues including employment status, and health and safety. In most global regions, strikes, log-offs and demonstrations predominated as a form of protest. Furthermore, platform worker protests showed a strong tendency to be driven from below by worker self- organization, although trade unions also had an important presence in some parts of the world. From the four platform sectors examined, ride-hailing and food delivery accounted for most protest events. Although the growth of platform worker organization is remarkable, formal collective bargaining is uncommon, as is formal employment, with ad hoc self-organized groups of workers dominating labour protest across the different sectors, particularly in the global South.
    Keywords: future of work, EDP personnel, electronic network, technological change, working conditions
    Date: 2022
  9. By: Caldarola, Bernardo.; Grazzi, Marco.; Occelli, Martina.; Sanfilippo, Marco.
    Abstract: This paper examines the relationship between mobile internet, employment and structural transformation in Rwanda. Thanks to its ability to enable access to a wide range of ICT technologies, internet coverage has the potential to affect the dynamics and the composition of employment significantly. To demonstrate this, we have combined GSMA network coverage maps with individual-level information from national population censuses and labour force surveys, creating a district-level dataset of Rwanda that covers the period 2002 to 2019. Our results show that an increase in mobile internet coverage affects the labour market in two ways. First, by increasing employment opportunities. Second, by contributing to changes in the composition of the labour market. Education, migration and shifts in demand are all instrumental in explaining our findings.
    Keywords: Internet, technological change, employment, labour force survey, electronic network, labour market analysis, case study
    Date: 2022
  10. By: Kanis Saengchote; Talis Putni\c{n}\v{s}; Krislert Samphantharak
    Abstract: Decentralized Finance (DeFi) is built on a fundamentally different paradigm: rather than having to trust individuals and institutions, participants in DeFi potentially only have to trust computer code that is enforced by a decentralized network of computers. We examine a natural experiment that exogenously stress tests this alternative paradigm by revealing the identities of individuals associated with a DeFi protocol, including a convicted criminal. We find that, in practice, DeFi does not (yet) fully remove the need for trust in individuals. Our findings suggest that that because smart contracts are incomplete, they are subject to run risk (Allen and Gale, 2004) and personal character and trust of individuals are still relevant in this alternative financial system.
    Date: 2022–07
  11. By: Fatemeh Nosrat
    Abstract: Crowdfunding, which is the act of raising funds from a large number of people's contributions, is among the most popular research topics in economic theory. Due to the fact that crowdfunding platforms (CFPs) have facilitated the process of raising funds by offering several features, we should take their existence and survival in the marketplace into account. In this study, we investigated the significant role of platform features in a customer behavioral choice model. In particular, we proposed a multinomial logit model to describe the customers' (backers') behavior in a crowdfunding setting. We proceed by discussing the revenue-sharing model in these platforms. For this purpose, we conclude that an assortment optimization problem could be of major importance in order to maximize the platforms' revenue. We were able to derive a reasonable amount of data in some cases and implement two well-known machine learning methods such as multivariate regression and classification problems to predict the best assortments the platform could offer to every arriving customer. We compared the results of these two methods and investigated how well they perform in all cases.
    Date: 2022–07
  12. By: Radka Bauerová (Department of Business Economics and Management, School of Business Administration, Silesian University); OndÅ™ej Mikšík (Department of Business Economics and Management, School of Business Administration, Silesian University); Lucie Vavrušková (Department of Business Economics and Management, School of Business Administration, Silesian University); KateÅ™ina Gavendová (Department of Business Economics and Management, School of Business Administration, Silesian University); Veronika Haladejová (Department of Business Economics and Management, School of Business Administration, Silesian University); Pavel VavruÅ¡ka (Department of Informatics and Mathematics, School of Business Administration, Silesian University)
    Abstract: Metaverse is a word so resonant in recent literature, yet so overlooked by many entrepreneurs. Despite the vast possibilities that the metaverse offers, its almost limitless nature is also responsible for the confusion that entrepreneurs may feel in connection with it. Despite the fact that it may be difficult for some to navigate the tangle of terms such as NFT, blockchain, avatar, and web 3.0, entrepreneurs should keep in mind that the metaverse is envisioned as the future evolution of the Internet, which will bring new opportunities for their businesses. The aim of this working paper is therefore to present the possibilities of the metaverse from the perspective of business opportunities. The contents of this paper are review studies on the current use and future possibilities of using the metaverse in marketing and business activities. The outcome of these studies is the definition of research directions within the research area that the authors believe are worth exploring in the future to increase knowledge that will contribute to the likelihood of metaverse acceptance as a platform for business.
    Keywords: avatar, metaverse, NFT, web 3.0, metaverse retailing
    JEL: M1 M3
    Date: 2022–07–31
  13. By: Marcus P. A. Cobb
    Abstract: When economies are hit by relevant shocks, the need to be able to follow developments in real-time increases for policymakers and private agents alike. When an event of this type is underway, the situation can change dramatically in a matter of days. The COVID pandemic is only the latest example. Electronic payment data is available with virtually no time lag and could therefore contribute to increasing the speed at which assessments are made. This paper makes use of a novel database to track Chilean household consumption in real time during the pandemic and compares the results to those of standard nowcasting methods used at the Central Bank of Chile. The results suggest that payment data is most useful as the shocks occur, when traditional models may have a harder time interpreting the information. The gain in more stable times is less obvious. The results also show, as one might expect, that the relationship between this naturally-occurring data and the variable of interest can be affected by its own shocks. In this case at least, electronic payments showed sudden shifts in intensity that needed to be accounted for in order to produce the final forecasts. All in all, the models based on payment data appear to be a relevant addition to the forecasting toolkit.
    Date: 2021–11
  14. By: Mr. Johannes Wiegand
    Abstract: In the early 1870s, the global monetary system transitioned from bimetallism—a regime in which gold and silver currencies were tied at quasi-fixed exhange ratios—to the gold standard that was characterized by the use of (only) gold as the main currency metal by the largest and most advanced economies. The transition ocurred against the backdrop of both large supply shifts in global bullion markets in the 1850s and 60s and momentous political events, such as the Franco-Prussian war of 1870/71 and the subsequent foundation of the German empire. The causes for the transition have long been a matter of intense debate. This article discusses three separate but interrelated issues: (i) assessing the robustness of the pre-1870 bimetallic system to shocks—which includes a discussion of the appropriate use of Flandreau’s (1996) reference model; (ii) analyzing the transition from bimetallism to gold as a multi-stage currency game played by France and Germany; and (iii) evaluating the monetary debates at the German Handelstag conferences in the 1860s, to present a more complete narrative of the German discussion in the run-up to the transition.
    Keywords: Bimetallism; Gold Standard; France; Germany; Gold share; Bimetallism's robustness; estimating specie demand; structural limit; share of silver coin; Gold; Silver; Currencies; Currency reform; Stocks; Global
    Date: 2022–06–17
  15. By: Dean Karlan; Matt Lowe; Robert Darko Osei; Isaac Osei-Akoto; Benjamin N. Roth; Christopher R. Udry
    Abstract: We study the impact of mobile money transfers to a representative sample of low-income Ghanaians during the COVID-19 pandemic. The announcement of the upcoming transfers affects neither consumption, well-being, nor social distancing. Once disbursed, transfers increase food expenditure by 8%, income by 20%, and a social distancing index by 0.08 standard deviations. Over 40% of the transfers were spent on food. The positive effects on income mostly persist at final measurement, eight months after the last transfer. Together, we learn that cash transfers can support households economically while also promoting adherence to public health protocols during a pandemic.
    JEL: H51 H84 O12
    Date: 2022–07
  16. By: Adam Kapor; Mohit Karnani; Christopher Neilson
    Abstract: We study the welfare and human-capital impacts of the configuration of on- and off-platform options in the context of Chile’s centralized higher education platform, leveraging administrative data and two policy changes: an expansion of the number of on-platform slots by approximately 40% and the introduction of a large scholarship program. We first show that more programs’ joining the platform led students to start college sooner and raised the share of students who graduated on time. We then develop a model of college applications, offers, waitlists, and matriculation choices, which we estimate using students’ ranked-ordered applications, on- and off-platform enrollment, and on-time graduation outcomes. When more programs join the platform, welfare increases, and the extent of aftermarket frictions matters less for welfare, enrollment, and graduation rates. High-SES students have greater access to off-platform options, and gains from platform expansion are larger for students from lower-SES backgrounds. Our results indicate that expanding the scope of a higher education platform can have real impacts on welfare and human capital.
    JEL: I20 L0
    Date: 2022–07
  17. By: Alexandre Chirat (Université Paris Ouest Nanterre - EconomiX); Guillaume Sekli (CRESE EA3190, Univ. Bourgogne Franche-Comté, F-25000 Besançon, France)
    Abstract: This article uses the main tools of cooperative game theory, the core of a game and the Shapley value, to tackle the challenge posed by corporate tax harmonization in order to fight tax competition and profit shifting. These tools are applied to provide a counterfactual evaluation and to assess the credibility of Saez and Zucman (2019) proposal to establish a minimum rate at 25% at the G7/G20 level. Based on the empirical data of Tørsløv et al. (2020), our main results are the following. First, at the G7 level, the more countries involved in the agreement, the more efficient it would be. Second, stability of cooperation at the G7 level can be achieved without giving up fairness consideration in the distribution of the surplus. We then extend our application to the G20 and show that these results do not hold anymore. Third, from our original methodological approach, we confirm that not only the target rate matters in the perspective of international tax cooperation, but also the numbers of participants and their current effective rates.
    Keywords: International taxation, Tax cooperation, Profit shifting, Tax havens, Shapley value
    JEL: E62 C71 F42
    Date: 2022–08
  18. By: Schuster, Caroline; Kar, Sohini
    Abstract: In the decade since the 2008 global financial crisis, much of the debate has been over whom to blame: reckless speculative finance or irresponsible (often low-income) borrowers. This essay takes up this set of moral arguments about what the poor can and should be able to afford by examining subprime logics at a global scale: subprime empire. Predatory lending in heartland America and development-oriented microcredit in places such as India and Paraguay appear not just to be geographically disparate but also to have different moral valences. After closer inspection, however, we argue that subprime lending and microfinance are two sides of the same coin. Our analysis of microfinance allows us to understand what is happening in the “in-between” as capital flows between financial investors and poor borrowers. By comparing financialization in India and Paraguay, we document and theorize the making of subprime empires that rely on actors within marginal financial sites to stabilize the evaluative frameworks and social interdependencies that make profits flow. We argue that the forms of financial capture and conversion in the “financial in-between” reproduce imperial dynamics by naturalizing the limited expectations of economic subjects of the global south and erasing the violence inherent in these forms of economic redistribution that maintain those expectations as such.
    JEL: F3 G3 N0
    Date: 2021–08–01
  19. By: Pamela Pogliani; Philip Wooldridge
    Abstract: Financial centres that cater predominantly to non-residents – which we refer to as cross-border financial centres (XFCs) –are important intermediaries of cross-border financial flows. For analysing capital flows and international interconnectedness, it can be useful to distinguish countries that are home to XFCs from other countries. We improve on previous methodologies for identifying such centres by constructing a measure focussed on the intermediation activity inherent to XFCs and explicitly taking into account the non-normal distribution of this measure across countries when detecting outliers. We also minimise volatility in the set of countries identified as XFCs over time by de-trending the data and pooling years. Our methodology identifies a core set of 12 countries as XFCs over the 1995-2020 period, but the countries vary with time and different measures of activity.
    Date: 2022–07

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