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on Payment Systems and Financial Technology |
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Issue of 2023‒05‒15
38 papers chosen by |
| By: | Andrea Carboni (Bank of Italy); Giuseppe Carone (Bank of Italy); Giuseppina Marocchi (Bank of Italy) |
| Abstract: | Recent years have shown a significant acceleration in the adoption and development of blockchains or Distributed Ledger Technologies, particularly in the financial sector. Alongside the well-known and widely used Bitcoin, other cryptocurrencies have been developed and have become popular (Ethereum, XRP...). As a result, digital wallets and exchange platforms are becoming commonly used technologies. Meanwhile, different instruments are being developed rapidly, which could be launched and reach scale in the near future; this is the case of stablecoins, Central Bank Digital Currencies (CBDCs) and Non-Fungible Tokens (NFTs). Besides technical details and contingent regulatory requirements, the purpose of this paper is to evaluate and highlight the impacts of such instruments on the compilation of external statistics. After a brief digression on the features and classification of digital assets, the potential effects on some BoP items are discussed (the current and financial account). |
| Keywords: | crypto-assets, crypto-currencies, stablecoins, balance of payments, remittances, payment services |
| JEL: | E4 F02 F24 F3 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_757_23&r=pay |
| By: | Markus K. Brunnermeier; Nicola Limodio; Lorenzo Spadavecchia |
| Abstract: | This paper explores the tradeoff between competition and financial inclusion given by the vertical integration between mobile network and money operators. Joining novel data on mobile money fees built through the WayBack machine, with sources on network coverage and financials, we examine the staggering across African operators and countries of platform interoperability – a policy that promotes transactions and competition across mobile money operators. Our findings show that interoperability lowers mobile money fees and reduces network coverage and mobile towers, especially in rural and poor districts. Interoperability also results in a decline in various survey metrics of financial inclusion. Keywords: Mobile Money, Interoperability, Financial inclusion JEL Codes: E42, L14, O10 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:igi:igierp:696&r=pay |
| By: | Brandon Tan |
| Abstract: | In this paper, we develop a model incorporating the impact of financial inclusion to study the implications of introducing a retail central bank digital currency (CBDC). CBDCs in developing countries (unlike in advanced countries) have the potential to bank large unbanked populations and boost financial inclusion which can increase overall lending and reduce bank disintermediation risks. Our model captures two key channels. First, CBDC issuance can increase bank deposits from the previously unbanked by incentivizing the opening of bank accounts for access to CBDC wallets (offsetting potential flows from deposits to CBDCs among those already banked). Second, data from CBDC usage allows for the building of credit to reduce credit-risk information asymmetry in lending. We find that CBDC can increase overall lending if (1) bank deposit liquidity risk is low, (2) the size and relative wealth of the previously unbanked population is large, and (3) CBDC is valuable to households as a means of payment or for credit-building. CBDC can still be optimal for household welfare even when overall lending decreases as households benefit from the value of using CBDC for payments, CBDC provides an alternative "safe" savings vehicle, and CBDC generates greater surplus in lending by reducing credit-risk information asymmetry. Most countries are considering a "two-tier" CBDC model, where central banks issue CBDC to commercial banks which in turn distribute them to consumers. If non-bank payment system providers can distribute CBDC, fewer funds will flow into deposit accounts from the unbanked because a bank account is no longer needed to access CBDC. If CBDC data is shareable with banks, those without bank accounts can still build credit and access lower interest rate loans. This design is optimal for welfare if the gains from greater access to CBDC outweigh the contraction in lending. |
| Keywords: | CBDC; Financial Inclusion; Digital currency; CBDC issuance; credit-risk information asymmetry; CBDC data; CBDC model; CBDC wallet; Central Bank digital currencies; Commercial banks; Deposit rates; Loans; Global |
| Date: | 2023–03–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2023/069&r=pay |
| By: | Jiageng Liu; Igor Makarov; Antoinette Schoar |
| Abstract: | Terra, the third largest cryptocurrency ecosystem after Bitcoin and Ethereum, collapsed in three days in May 2022 and wiped out $50 billion in valuation. At the center of the collapse was a run on a blockchain-based borrowing and lending protocol (Anchor) that promised high yields to its stablecoin (UST) depositors. Using detailed data from the Terra blockchain and trading data from exchanges, we show that the run on Terra was a complex phenomenon that happened across multiple chains and assets. It was unlikely due to concentrated market manipulation by a third party but instead was precipitated by growing concerns about the sustainability of the system. Once a few large holders of UST adjusted their positions on May 7th, 2022, other large traders followed. Blockchain technology allowed investors to monitor each other's actions and amplified the speed of the run. Wealthier and more sophisticated investors were the first to run and experienced much smaller losses. Poorer and less sophisticated investors ran later and had larger losses. The complexity of the system made it difficult even for insiders to understand the buildup of risk. Finally, we draw broader lessons about financial fragility in an environment where a regulatory safety net does not exist, pseudonymous transactions are publicly observable, and market participants are incentivized to monitor the financial health of the system. |
| JEL: | E42 E44 G21 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31160&r=pay |
| By: | Ms. Inutu Lukonga |
| Abstract: | Central bank digital currencies (CBDCs) promise many benefits but, if not well designed, they could have undesired consequences, including for monetary policy. Issuing an unremunerated CBDC or a wholesale CBDC does not change the objectives of monetary policy or the operational framework for monetary policy. CBDCs can, however, induce changes in the retail, wholesale and cross border payments that have negative spillover effects on monetary policy, through their effects on money velocity, bank deposit disintermediation, volatility of bank reserves, currency substitution, and capital flows. Countries most vulnerable are those with banking systems dominated by small retail deposits and demand deposits, low levels of digital payments and weak macro fundamentals. Proposed CBDC design features, such as caps on CBDC holdings and unremunerating the CBDC can moderate disintermediation risks, but they are not sufficient. Central banks will need to ensure that unintended macroeconomic risks are comprehensively identified and mitigated. |
| Keywords: | Central Bank Digital Currencies; CBDC; CBDC Pilots; Monetary Policy; Islamic Finance; impact monetary policy implementation; design option; unremunerated CBDC; monetary policy implication; deposit disintermediation; Commercial banks; Velocity of money; Islamic banking; Monetary base; Global |
| Date: | 2023–03–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2023/060&r=pay |
| By: | Ms. Longmei Zhang; Hector Perez-Saiz; Roshan Iyer |
| Abstract: | While the global usage of currencies other than the U.S. dollar and the euro for cross-border payments remains limited, rapid technological (e.g. digital money) or geopolitical changes could accelerate a regime shift into a multipolar or more fragmented international monetary system. Using the rich Swift database of cross-border payments, we empirically estimate the importance of legal tender status, geopolitical distance, and other variables vis-à-vis the large inertia effects for currency usage, and perform several forecasting simulations to better understand the role of these variables in shaping the future payments landscape. While our results suggest a substantially more fragmented international monetary system would be unlikely in the short and medium term, the impact of new technologies remains highly uncertain, and much more rapid geopolitical developments than expected could accelerate the transformation of the international monetary system towards multipolarity. |
| Keywords: | Cross border payments; Swift; currency dominance; legal tender; international monetary system (IMS) |
| Date: | 2023–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2023/072&r=pay |
| By: | Quimba, Francis Mark A.; Barral, Mark Anthony A.; Carlos, Jean Clarisse T. |
| Abstract: | Financial technology (fintech) in the Philippines has gained more attention in recent years, especially during the onset of the COVID-19 pandemic when lockdowns were prevalent and cashless payments were encouraged. Thus, digital payments and engagements through various platforms have increased, resulting in more diversified financial products and services. Despite these developments, financial inclusion in the Philippines has lagged behind other Association of Southeast Asian Nations member-states. This paper analyzes the state of the fintech industry and investigates how the government can support the development of its ecosystem to ensure its contribution to the country’s development goals. It concludes that the Philippines has a strong fintech industry, as indicated by a growing number of fintechs (particularly in payments, lending, and banking technology verticals) and increasing capitalization. Finally, for the fintech industry to support the country’s financial inclusion goals, the availability of talent and credit for the sector must be improved. |
| Keywords: | business models;financial literacy;financial inclusion;e-money;fintech;FinTech ecosystem;lending |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:phd:rpseri:rps_2023-01&r=pay |
| By: | Dirk Bergemann; Alessandro Bonatti |
| Abstract: | We analyze digital markets where a monopolist platform uses data to match multiproduct sellers with heterogeneous consumers who can purchase both on and off the platform. The platform sells targeted ads to sellers that recommend their products to consumers and reveals information to consumers about their values. The revenue-optimal mechanism is a managed advertising campaign that matches products and preferences efficiently. In equilibrium, sellers offer higher qualities at lower unit prices on than off the platform. Privacy-respecting data-governance rules such as organic search results or federated learning can lead to welfare gains for consumers. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.07653&r=pay |
| By: | Ruixue Jing; Luis Enrique Correa Rocha |
| Abstract: | A cryptocurrency is a digital asset maintained by a decentralised system using cryptography. Investors in this emerging digital market are exploring the profitability potential of portfolios in place of single coins. Portfolios are particularly useful given that price forecasting in such a volatile market is challenging. The crypto market is a self-organised complex system where the complex inter-dependencies between the cryptocurrencies may be exploited to understand the market dynamics and build efficient portfolios. In this letter, we use network methods to identify highly decorrelated cryptocurrencies to create diversified portfolios using the Markowitz Portfolio Theory agnostic to future market behaviour. The performance of our network-based portfolios is optimal with 46 coins and superior to benchmarks up to an investment horizon of 14 days, reaching up to 1, 066% average expected return within 1 day, with reasonable associated risks. We also show that popular cryptocurrencies are typically not included in the optimal portfolios. Past price correlations reduce risk and may improve the performance of crypto portfolios in comparison to methodologies based exclusively on price auto-correlations. Short-term crypto investments may be competitive to traditional high-risk investments such as the stock market or commodity market but call for caution given the high variability of prices. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.02362&r=pay |
| By: | Seppälä, Timo; Mucha, Tomasz; Mattila, Juri |
| Abstract: | Abstract The ever-progressing digitalization of the economy and society is unlocking new opportunities for organizations engaging in services. We are in the middle of a transformation of the service sector that can be likened to the advent of mass production in the 1940s. Based on recent advances and developments in artificial intelligence, digital platforms, and blockchain systems, we are witnessing the emergence of new digitalization phenomena of metahuman systems, artificial intelligence platforms, and meta-organizations. Jointly, these forces are shaping now, or will be in the near future, the service activities of organizations around the world. They enable mass hyper-personalized services and mass servitization – new types of high variety and high-volume service processes. Artificial intelligence applications like search and recommendation engines, and artificial intelligence platforms such as Google Maps, Chat GPT, BloombergGPT and Stable Diffusion can be perceived as early manifestations of the ongoing transformation. Already in the present day, applications and platforms such as these can be adopted in a wide range of downstream tasks, thus enabling personalized service experiences for audiences of one. While increasing the value of service offerings, mass hyper-personalization and mass servitization also have the potential to increase the productivity of service operations and the entire service sector, especially in the context of knowledge-intensive work. This working paper reflects and provides an up-to-date synthesis of key emerging concepts on digitalization, services and research directions grounded in our current research. See also the book The Fifth Wave – BRIE-ETLA Collection of Articles (ETLA B281). |
| Keywords: | Artificial intelligence, Artificial intelligence platforms, Blockchain systems, Digital platforms, Hyper-personalized services, Mass hyper-personalization, Mass services, Mass servitization, Metahuman systems, Meta-organizations, Operations, Productivity, Professional services, Service productivity, Service shops |
| JEL: | L8 L84 |
| Date: | 2023–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:rif:wpaper:106&r=pay |
| By: | Alexandre De Cornière (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Miklos Sarvary (Columbia Business School - Columbia University [New York]) |
| Abstract: | The growing influence of internet platforms acting as content aggregators is one of the most important challenges facing the media industry. We develop a simple model to understand the impact of third-party content bundling by a social platform that has a monopoly on showing user-generated content to consumers. In our model consumers can access news either directly through a newspaper's website, or indirectly through a platform, which also offers social content. We show that content bundling, when unilaterally implemented by the platform, tends to harm publishers and to increase the dispersion of quality across outlets, with initially high-quality outlets investing more and low-quality ones investing less. With many heterogenous newspapers, the result is robust even if each newspaper can prevent the platform from using its content. When content bundling follows an agreement between the platform and publisher, its effects are reversed, as publishers' profits go up while quality dispersion goes down. In a setup with heterogeneous consumers, we also show that the platform's ability to personalize the mix of content it shows to users induces publishers to invest more in the quality of their content. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04067655&r=pay |
| By: | Katherine Baer; Ruud A. De Mooij; Shafik Hebous; Michael Keen |
| Abstract: | Policymakers are struggling to accommodate cryptocurrencies within tax systems not designed to handle them; this paper reviews the issues that arise. The greatest challenges are for implementation: crypto’s quasi-anonymity is an inherent obstacle to third-party reporting. Design problems arise from crytocurrencies’ dual nature as investment assets and means of payment: more straightforward is a compelling case for corrective taxation of carbon-intensive mining. Ownership is highly concentrated at the top, but many crypto investors have only moderate incomes. The capital gains tax revenue at stake worldwide may be in the tens of billions of dollars, but the more profound risks may ultimately be for VAT/sales taxes. |
| Keywords: | cryptocurrency, virtual assets, tax evasion, tax compliance, Bitcoin |
| JEL: | E62 H25 H32 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10372&r=pay |
| By: | Nick James; Max Menzies |
| Abstract: | Since its conception, the cryptocurrency market has been frequently described as an immature market, characterized by significant swings in volatility and occasionally described as lacking rhyme or reason. There has been great speculation as to what role it plays in a diversified portfolio. For instance, is cryptocurrency exposure an inflationary hedge or a speculative investment that follows broad market sentiment with amplified beta? This paper aims to investigate whether the cryptocurrency market has recently exhibited similarly nuanced mathematical properties as the much more mature equity market. Our focus is on collective dynamics and portfolio diversification in the cryptocurrency market, and examining whether previously established results in the equity market hold in the cryptocurrency market, and to what extent. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.08902&r=pay |
| By: | Cyrielle Gaglio (University of Helsinki; Sciences Po, OFCE, France); Erika Kraemer-Mbula (University of Johannesburg); Edward Lorenz (Université Côte d'Azur, France; GREDEG CNRS) |
| Abstract: | This paper aims to study the links between the use of digital communication technologies, innovation performance and productivity for a sample of micro and small enterprises (MSEs) in a middle-income country, South Africa. Based on the results of an original survey carried out in 2019, we investigate these links for a sample of 711 manufacturing MSEs located in Johannesburg. We estimate the relations sequentially, first estimating the relation between digitalization and innovation, and secondly the relation between innovation and productivity. Our results show that selected digital communication technologies including the use of social media and the use of a business mobile phone for browsing the internet have a positive effect on innovation, and that innovation conditional on the use of these technologies has a positive impact on labor productivity. |
| Keywords: | Digital communication technologies, Product innovation, Productivity, MSEs, Johannesburg |
| JEL: | O14 O31 O4 |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2022-19&r=pay |
| By: | Patrick T. Harker |
| Abstract: | Patrick T. Harker, president and chief executive officer of the Philadelphia Fed, told an audience at the Sixth Annual Fintech Conference in Philadelphia that “fintech can help foster financial inclusion.” Especially when used with alternative methods of evaluating creditworthiness, “the opportunities to use fintech to reach the economically constrained and financially marginalized are truly exciting, ” he said. |
| Keywords: | fintech |
| Date: | 2022–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpsp:94545&r=pay |
| By: | Costanza Catalano (Bank of Italy); Andrea Carboni (Bank of Italy); Claudio Doria (Bank of Italy) |
| Abstract: | In tourism statistics it is becoming more and more important to identify data sources that are more timely and cheaper than the traditional ones, such as surveys. In this paper, we investigate how mobile phone data (MPD), electronic payments data and internet search data (Google Trends) can improve the compilation of tourism statistics and the 'travel' item in the Balance of Payments (BoP). We find that MPD have the potential to improve the estimates of the number of international travelers and can be integrated with surveys, although a constant interaction with the data supplier is required to identify the phenomena to be captured. We highlight the limitations and issues in using electronic payment data for estimating expenditure in tourism statistics, and we propose a model for producing more timely preliminary estimates for BoP purposes. Finally, we point out that Google Trends data can be used to complement the sample estimates of international travelers and to improve the quality of provisional data. |
| Keywords: | big data, international tourism, mobile phone data, payments statistics, Google Trends |
| JEL: | I31 I32 D63 D31 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_761_23&r=pay |
| By: | Maurizio Trapanese (Banca d'Italia); Michele Lanotte (Banca d'Italia) |
| Abstract: | Technological progress in finance has been accelerating over the last decade. In the future, it is likely that financial intermediaries may undergo significant challenges as regards their traditional business model and functions, since an increasing share of payments may be settled without banks’ deposits and capital markets may increasingly provide direct credit to the economy. This paper aims to outline the theoretical and regulatory implications stemming from digital financial markets, with a particular focus on the growing importance of BigTech and FinTech firms. We study the importance of information and communication in financial intermediation, and outline the impact of technological progress on the core functions traditionally performed by banks and other financial institutions, and on payment systems. In this context, we discuss the role of public policies, and the main issues for regulation, supervision, competition, and consumer protection. |
| Keywords: | firm behaviour, international financial markets, financial institutions, financial policy and regulation, risk management JEL Classification: D21, G15, G20, G28, G32 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_758_23&r=pay |
| By: | Gimenes, André Dias; Colombo, Jéfferson A.; Yousaf, Imran |
| Abstract: | We evaluate the stock market reaction following publicly-traded companies' announcements of cryptocurrency acquisition, selling, or acceptance as a means of payment. Focusing on firms whose core business is unrelated to blockchain or cryptocurrency (i.e., traditional firms), we analyze 35 events associated with 32 companies listed on stock exchanges from 7 countries. At the aggregate level, market reaction around such events is slightly positive but statistically indistinguishable from zero for most event windows. However, heterogeneity analyses reveal remarkable differences in market reaction between high (larger CARs) and low cryptocurrency exposure events (lower CARs). Multivariate regressions confirm that the extent to which a firm is exposed to cryptocurrency ("skin in the game") is a critical factor underlying abnormal returns around the event. Further analyses reveal that such an effect stems from economically meaningful acquisitions of BTC or ETH (relative to the firm's total assets). Our evidence is crucial to managers, investors, and analysts since it highlights how crypto adoption relates to firm value. |
| Date: | 2023–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:eesptd:563&r=pay |
| By: | Vittorio Astarita |
| Abstract: | This study provides a practical introduction to high-frequency trading in blockchain-based currency markets. These types of markets have some specific characteristics that differentiate them from the stock markets, such as a large number of trading exchanges (centralized and decentralized), relative simplicity in moving funds from one exchange to another, and the large number of new currencies that have very little liquidity. This study analyzes the possible risks that specifically characterize this type of trading operation, the potential opportunities, and the algorithms that are mostly used, providing information that can be useful for practitioners who intend to operate in these markets by providing (and risking) liquidity. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.08590&r=pay |
| By: | Dirk Bergemann; Alessandro Bonatti; Nicholas Wu |
| Abstract: | We develop an auction model for digital advertising. A monopoly platform has access to data on the value of the match between advertisers and consumers. The platform support bidding with additional information and increase the feasible surplus for on-platform matches. Advertisers jointly determine their pricing strategy both on and off the platform, as well as their bidding for digital advertising on the platform. We compare a data-augmented second-price auction and a managed campaign mechanism. In the data-augmented auction, the bids by the advertisers are informed by the data of the platform regarding the value of the match. This results in a socially efficient allocation on the platform, but the advertisers increase their product prices off the platform to be more competitive on the platform. In consequence, the allocation off the platform is inefficient due to excessively high product prices. The managed campaign mechanism allows advertisers to submit budgets that are then transformed into matches and prices through an autobidding algorithm. Compared to the data-augmented second-price auction, the optimal managed campaign mechanism increases the revenue of the digital platform. The product prices off the platform increase and the consumer surplus decreases. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.08432&r=pay |
| By: | Lena Abou El-Komboz; Anna Kerkhof; Johannes Loh |
| Abstract: | Many digital platform host content produced by independent creators and rely on advertising as their primary source of revenues. They commonly use partnership programs to put into place incentives for creators to produce high-quality content by sharing part of the advertising revenue with them. In addition, these programs let them exercise control over their participation to prevent the presence of “bad-faith” actors who can otherwise harm the integrity of the platform. However, the rules governing access to such programs may have to be adjusted over time, which in turn may disrupt creators’ motivation to produce content. This paper studies a rule change on YouTube that made access to its partner program more restrictive. This also removed all former participants who did not meet the new requirements and made it impossible for them to continue commercializing their content on the platform. Using a regression discontinuity design, we provide causal evidence that affected creators subsequently reduced the frequency of their uploads and provided content of lower quality and diversity. We also investigate and discuss effect heterogeneity between mainstream and niche as well as more and less experienced creators to learn about the underlying financial and non-pecuniary motivations. Our findings provide novel insights about the effective governance of ad-based platforms using partnership programs. |
| Keywords: | platform governance, partnership programs, content supply, ad-based business models, access restrictions |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10363&r=pay |
| By: | FERNANDEZ MACIAS Enrique (European Commission - JRC); URZI BRANCATI Maria Cesira; WRIGHT Sally; PESOLE Annarosa |
| Abstract: | This report provides a first approximation to the emerging phenomenon of platformisation of work, with an empirical analysis of data from the new JRC Algorithmic Management and Platform Work survey (AMPWork) in Spain and Germany. The study focuses on three key elements of platforms: the digital devices used at work, the digital monitoring of work, and the use of algorithms for work organisation. These three elements are studied in three different contexts: regular work settings, Digital Labour Platforms and content sharing platforms. The implications of these new forms of work for work organisation and working conditions are also discussed. The findings show that a small but significant proportion of workers in the two countries analysed are subject to digital monitoring and algorithmic management systems at work to some degree. A smaller but not marginal proportion of the working age population get their main income from providing labour services through Digital Labour Platforms. And another sizeable proportion of the working age population spend a significant amount of time producing unpaid content for sharing platforms outside their family and close friends. |
| Keywords: | platform work, digital labour platforms, algorithmic management, digital monitoring, platformisation |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc133016&r=pay |
| By: | Fantazzini, Dean |
| Abstract: | In this paper, we analyzed a dataset of over 2000 crypto-assets to assess their credit risk by computing their probability of death using the daily range. Unlike conventional low-frequency volatility models that only utilize close-to-close prices, the daily range incorporates all the information provided in traditional daily datasets, including the open-high-low-close (OHLC) prices for each asset. We evaluated the accuracy of the probability of death estimated with the daily range against various forecasting models, including credit scoring models, machine learning models, and time-series-based models. Our study considered different definitions of ``dead coins'' and various forecasting horizons. Our results indicate that credit scoring models and machine learning methods incorporating lagged trading volumes and online searches were the best models for short-term horizons up to 30 days. Conversely, time-series models using the daily range were more appropriate for longer term forecasts, up to one year. Additionally, our analysis revealed that the models using the daily range signaled, far in advance, the weakened credit position of the crypto derivatives trading platform FTX, which filed for Chapter 11 bankruptcy protection in the United States on 11 November 2022. |
| Keywords: | daily range; bitcoin; crypto-assets; cryptocurrencies; credit risk; default probability; probability of death; ZPP; cauchit; random forests |
| JEL: | C32 C35 C51 C53 C58 G12 G17 G32 G33 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:117141&r=pay |
| By: | Maria Demertzis; Catarina Martins |
| Abstract: | Given the importance of digitalisation, it is fair to ask whether these digital decentralised services will become established and normalised. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polbrf:node_8930&r=pay |
| By: | Dayal Saraswat, Kinshuk |
| Abstract: | In Asia, e-commerce has the potential to generate considerable economic benefits due to the significant opportunities it offers. Recent years have seen a significant development in the global economy that has been referred to as e-commerce (electronic commerce). In order for the Asian countries to be able to take advantage of the opportunities presented by this global trend of growth, they will still have to make progress in areas such as connectivity, services, rules and regulations, as well as labour skills. As a result of government policy, the market can be assisted to maximize the benefits of the information revolution, and to mitigate the risk of potential market failure, as well as to facilitate market mechanisms that will facilitate the transition. E-commerce has the potential to play a significant role in the development of Asia and the Pacific as a whole. Over the last few years, the Asia Pacific region has grown at the fastest pace compared to any other region of the global business-to-consumer e-commerce market, making up the majority of the global e-commerce market in the business-to-consumer segment. It is expected that Asian and Pacific countries will have a 25% share of e-commerce in their Gross Domestic Product by the end of 2025, according to the World Bank. Among the many advantages of e-commerce for small and medium-sized businesses, one of the most notable is the ability to reach global markets and to compete at a global level. |
| Keywords: | global economy, intergovernmental cooperation, e-transactions, cybersecurity, big data analytics, the internet of things (IoT), artificial intelligence (AI), augmented reality (AR), virtual reality (VR), and blockchain technology |
| JEL: | F43 L8 L81 O1 |
| Date: | 2021–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:116837&r=pay |
| By: | Leonardo Gambacorta (Bank for International Settlements); Romina Gambacorta (Bank of Italy); Roxana Mihet (HEC Lausanne) |
| Abstract: | This paper analyses the links between advances in financial technology, investors' sophistication, and their financial portfolios' composition and returns. We develop a simple portfolio choice model under asymmetric information and derive some theoretical predictions. Using detailed micro data from the Bank of Italy, we test these predictions for Italian households over the period 2004-2020. In general, heterogeneity in portfolio composition and in returns between sophisticated and unsophisticated investors grows with improvements in financial technology. This heterogeneity is reduced only if financial technology is accessible by everyone and if investors have a similar capacity to use it. |
| Keywords: | inequality, inclusion, fintech, innovation, Matthew effect |
| JEL: | G1 G5 G4 D83 L8 O3 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_763_23&r=pay |
| By: | Hans Gersbach; Akaki Mamageishvili; Fikri Pitsuwan |
| Abstract: | Systems and blockchains often have security vulnerabilities and can be attacked by adversaries, with potentially significant negative consequences. Therefore, organizations and blockchain infrastructure providers increasingly rely on bug bounty programs, where external individuals probe the system and report any vulnerabilities (bugs) in exchange for monetary rewards (bounty). We develop a contest model for bug bounty programs with an arbitrary number of agents who decide whether to undertake a costly search for bugs or not. Search costs are private information. Besides characterizing the ensuing equilibria, we show that even inviting an unlimited crowd does not guarantee that bugs are found. Adding paid agents can increase the efficiency of the bug bounty scheme although the crowd that is attracted becomes smaller. Finally, adding (known) bugs increases the likelihood that unknown bugs are found, but to limit reward payments it may be optimal to add them only with some probability. |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.00077&r=pay |
| By: | Christoph Carnehl; Maximilian Schaefer; André Stenzel; Kevin Ducbao Tran |
| Abstract: | We investigate the impact of prices on ratings using Airbnb data. We theoretically illustrate two opposing channels: higher prices reduce the value for money, worsening ratings, but they increase the taste-based valuation of the average traveler, improving ratings. Results from panel regressions and a regression discontinuity design suggest a dominant value-for-money effect. In line with our model, hosts strategically complement lower prices with higher effort more when ratings are relatively low. Finally, we provide evidence that, upon entry, strategic hosts exploit the dominant value-for-money effect. The median entry discount of seven percent improves medium-run monthly revenues by three percent. |
| Keywords: | Rating Systems, Dynamic Pricing, Asymmetric Information |
| JEL: | D18 D25 D47 D82 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_411&r=pay |
| By: | Saki Bigio |
| Abstract: | This paper introduces an endogenous network of payments chains into a business cycle model. Agents order production in bilateral relations. Some payments are executed immediately. Other payments, chained payments, are delayed until other payments are executed. Because production starts only after orders are paid, chained payments induce production delays. In equilibrium, agents choose the amount of chained payments given interest rates and access to internal funds or credit lines. This choice determines the payments-chain network and aggregate total-factor productivity (TFP). The paper characterizes equilibrium dynamics and their innate inefficiencies. Agents internalize the direct costs of their payment delays, but do not internalize the costs induced onto others. This externality produces novel policy insights and rationalizes permanent reductions in TFP under excessive debt. |
| Keywords: | Payments, Networks, Business Cycles |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:apc:wpaper:191&r=pay |
| By: | Javier López González; Silvia Sorescu; Pinar Kaynak |
| Abstract: | This paper provides an overview of the evolving nature of digital trade and digital trade policies. It shows that digital trade has been growing faster than “non-digital” trade. By 2018, 24% of global trade (USD 5.1 trillion) could be considered digital trade. In parallel, countries have embraced digital trade provisions in trade agreements and new digital economy agreements have emerged. The empirical analysis shows that growing digital connectivity delivers a double dividend, increasing both domestic and international trade. It also shows that digital trade chapters have the potential to double the effect of trade agreements, while reductions in domestic barriers affecting digital trade have a strong export-enhancing effect, particularly in digitally-deliverable services. Overall, the results suggest that digital connectivity and digital trade policies play a significant and growing role in reducing trade costs and increasing trade across countries at all levels of development. The paper calls for wider participation and ambition in discussions at the WTO. |
| Keywords: | Data Flows, Digital connectivity, Digital trade, E-commerce, Trade agreements, Trade costs |
| JEL: | F13 F14 F15 F68 O33 C54 |
| Date: | 2023–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:oec:traaab:273-en&r=pay |
| By: | Isaac K. Ofori (University of Insubria, Varese, Italy); Emmanuel Y. Gbolonyo (University of Cape Town, South Africa); Marcel A. Toyo Dossou (Sichuan , China); Richard K. Nkrumah (University of Cape Coast, Ghana); Emmanuel Nkansah (Middle Tennessee State University, USA) |
| Abstract: | The study employs macro data for 42 African countries to examine the interactive and threshold effects of financial development in the remittances-inclusive growth relationship. First, evidence based on the system GMM estimator shows that remittances are not statistically significant in promoting inclusive growth in Africa. Notably, across the economic growth and income inequality dimensions of inclusive growth, we find that although remittances are ineffective in boosting the former, they deepen the latter. Second, we find that Africa’s underdeveloped financial sector dampens the marginal positive effect of remittances on inclusive growth. Third, our threshold analysis indicates that for financial development to interact with complementary policies to foster inclusive growth in Africa, a minimum threshold of 14.5% is required. We conclude by informing policy on the level of investments needed for financial development to promote fairer income growth and distribution in Africa. |
| Keywords: | Africa, Financial Development, Inclusive Growth, Income Inequality, GMM, Remittances |
| JEL: | F22 F24 G21 I3 N27 O11 O55 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:23/024&r=pay |
| By: | Howard Zhong; Mark Hamilton |
| Abstract: | Non-Fungible Tokens (NFTs) are non-interchangeable assets, usually digital art, which are stored on the blockchain. Preliminary studies find that female and darker-skinned NFTs are valued less than their male and lighter-skinned counterparts. However, these studies analyze only the CryptoPunks collection. We test the statistical significance of race and gender biases in the prices of CryptoPunks and present the first study of gender bias in the broader NFT market. We find evidence of racial bias but not gender bias. Our work also introduces a dataset of gender-labeled NFT collections to advance the broader study of social equity in this emerging market. |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.06484&r=pay |
| By: | Patrick T. Harker |
| Abstract: | Philadelphia Fed President and CEO Patrick Harker delivered remarks at a Global Interdependence Center event in La Jolla, CA. Harker spoke about the financial impact of the pandemic on American families. “We saw Americans embrace new ways of making payments, ” said Harker, noting that the consumer shift to online shopping and new technology for payments have “real staying power.” He shared the Philadelphia Fed’s ongoing research tracking key trends in consumer spending habits. “What we have yet to see is how these shifts will play out in the long run — and how they will affect the Federal Reserve’s solemn responsibility of fostering an economy where all Americans can thrive.” |
| Date: | 2023–02–10 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpsp:95633&r=pay |
| By: | Hannah Bensussan (CEPN - Centre d'Economie de l'Université Paris Nord - LABEX ICCA - UP13 - Université Paris 13 - Université Sorbonne Nouvelle - Paris 3 - CNRS - Centre National de la Recherche Scientifique - UPCité - Université Paris Cité - Université Sorbonne Paris Nord - CNRS - Centre National de la Recherche Scientifique - Université Sorbonne Paris Nord) |
| Abstract: | Studies on the digitalization of markets and economic relations provide contrasting statements on its impact on consumers: it seems to have enhanced both control and freedom of these actors. This paper proposes to understand this paradox through the lens of Stafford Beer's cybernetic theory. We read the literature on digitalization and consumption at the light of Beer's concepts of regulated variety, regulatory variety and recursion, three concepts at the source of Beer's understanding of control and freedom. These concepts, we argue, allow to show the conditioned rise of consumers' freedom to the purpose of control in capitalist orders, i.e., commodity circulation and capital accumulation. |
| Keywords: | Control, freedom, consumption, digital capitalism |
| Date: | 2023–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-04050331&r=pay |
| By: | Jaller, Miguel; Pahwa, Anmol |
| Abstract: | E-commerce can potentially make urban goods flow economically viable, environmentally efficient, and socially equitable. However, as e-retailers compete with increasingly consumer-focused services, urban freight witnesses a significant increase in associated distribution costs and negative externalities, particularly affecting those living close to logistics clusters. Hence, to remain competitive, e-retailers deploy alternate last-mile distribution strategies. These alternate strategies, such as those that include the use of electric delivery trucks for last-mile operations, a fleet of crowdsourced drivers for last-mile delivery, consolidation facilities coupled with light-duty delivery vehicles for a multi-echelon distribution, or collection-points for customer pickup, can restore sustainable urban goods flow. Thus, in this study, the authors investigate the opportunities and challenges associated with alternate last-mile distribution strategies for an e-retailer offering expedited service with rush delivery within strict timeframes. To this end, the authors formulate a last-mile network design (LMND) problem as a dynamic-stochastic two-echelon capacitated location routing problem with time-windows (DS-2E-C-LRP-TW) addressed with an adaptive large neighborhood search (ALNS) metaheuristic. View the NCST Project Webpage |
| Keywords: | Business, Engineering, e-commerce, last-mile network design, sustainability, adaptive large neighborhood search |
| Date: | 2023–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:itsdav:qt5t76x0kh&r=pay |
| By: | Foued Sa\^adaoui |
| Abstract: | Multifractal analysis is a forecasting technique used to study the scaling regularity properties of financial returns, to analyze the long-term memory and predictability of financial markets. In this paper, we propose a novel structural detrended multifractal fluctuation analysis (S-MF-DFA) to investigate the efficiency of the main cryptocurrencies. The new methodology generalizes the conventional approach by allowing it to proceed on the different fluctuation regimes previously determined using a change-points detection test. In this framework, the characterization of the various exogenous factors influencing the scaling behavior is performed on the basis of a single-factor model, thus creating a kind of self-explainable machine learning for price forecasting. The proposal is tested on the daily data of the three among the main cryptocurrencies in order to examine whether the digital market has experienced upheavals in recent years and whether this has in some ways led to a structured multifractal behavior. The sampled period ranges from April 2017 to December 2022. We especially detect common periods of local scaling for the three prices with a decreasing multifractality after 2018. Complementary tests on shuffled and surrogate data prove that the distribution, linear correlation, and nonlinear structure also explain at some level the structural multifractality. Finally, prediction experiments based on neural networks fed with multi-fractionally differentiated data show the interest of this new self-explained algorithm, thus giving decision-makers and investors the ability to use it for more accurate and interpretable forecasts. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.08440&r=pay |
| By: | Jahan Abdul Raheem (University of Waikato); Gazi M. Hassan (University of Waikato); Mark J. Holmes (University of Waikato) |
| Abstract: | Remittances contribute to welfare enhancement and poverty alleviation in many remittance-recipient economies. However, recent literature also focuses on the macroeconomic impact of remittances due to their increasing inflow into these economies. We use an unbalanced heterogeneous panel Structural Vector Autoregression (SVAR) methodology to study the impact of remittances on intermediate monetary transmission channels in remittance-recipient countries. In particular, we analyse the effect of remittances on credit and exchange rate channels in these economies. We, initially, estimate credit and exchange rate impulse responses (IRs) to a shock in remittances. The IRs estimates suggest a significant variation among countries in credit and exchange rates in response to a shock in remittances. In the next stage, we run a cross-section regression of these responses to identify the factors influencing the IRs of these variables. We find that the magnitude of remittances received by an economy significantly impacts the exchange rate channel thus affecting the smooth functioning of the monetary transmission mechanism. However, the effect of remittances on the credit channel is dependent on the level of remittance inflows and savings in remittance-recipient economies. Our finding also reveals that remittances weaken the functioning of the credit channel at a higher level of remittance inflows, especially, when the remittances are higher than approximately five percent of GDP in remittance-recipient economies. Overall, our findings have broad policy implications revealing that policymakers have to pay attention to the possible effects of remittances on intermediate monetary transmission channels in achieving the monetary policy targets. |
| Keywords: | remittances;monetary policy;monetary transmission mechanism |
| JEL: | E5 E52 F24 |
| Date: | 2023–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:wai:econwp:23/06&r=pay |
| By: | Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa) |
| Abstract: | The present study contributes to the extant literature by assessing how microfinance institutions (MFIs) affect female entrepreneurship, contingent on female unemployment levels. The study focuses on 44 countries in sub-Saharan Africa (SSA) for the period 2004 to 2018. The empirical evidence is based on interactive quantile regressions, which put emphasis on nations with high, low and intermediate levels of business constraints. The analysis is tailored to provide avoidable female unemployment levels in the implementation of policies designed for MFIs to promote female business ownership. The hypotheses that MFIs are favorable for female business owners and some critical rates of female unemployment should be avoided in order for the favorable incidence to be maintained is exclusively valid in the 10th quantiles of the cost of business by females and time to start-up a business by females. Policy implications are discussed. This study has complemented the extant literature by providing actionable female unemployment critical masses that governments can act upon in tailoring the nexus between the relevance of MFIs in the doing of business by females. |
| Keywords: | Africa; Microfinance; Gender; Inclusive development |
| JEL: | G20 I10 I32 O40 O55 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:aak:wpaper:23/007&r=pay |