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on Payment Systems and Financial Technology |
| By: | Pablo D. Azar; Adrian Casillas; Maryam Farboodi |
| Abstract: | Decentralized Finance, or DeFi, is a rapidly growing ecosystem of financial applications built on blockchain technology, primarily on the Ethereum network. These applications aim to recreate traditional financial instruments and services, such as lending, borrowing, trading, and insurance. The DeFi intermediation chain connects a series of intermediaries who find arbitrage opportunities, aggregate transactions into blocks, validate these blocks, and ultimately append them to the blockchain. In this post, we summarize results from our staff report describing how arbitrage opportunities arise in the Ethereum blockchain, and how the need to keep these arbitrage opportunities private gives rise to the intermediation chain. |
| Keywords: | financial intermediation; digital assets; intermediation chains |
| JEL: | G23 D82 |
| Date: | 2024–08–05 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:98626 |
| By: | Martin Peitz |
| Abstract: | In this chapter, I review the economic theory of two-sided platforms. First, I elaborate on the prevailing price structure in monopoly and oligopoly and explore the prevailing market structure. Second, I consider the choice of non-price strategies that affect users on the platform and address the horizontal and vertical scope of platforms. |
| Keywords: | Two-sided platform, price theory, digital markets, network effects, platform design |
| JEL: | L12 L13 L41 L42 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_584 |
| By: | Marcelo Corrales Compagnucci; Toshiyuki Kono; Shinto Teramoto |
| Abstract: | The sharing economy is sprawling across almost every sector and activity around the world. About a decade ago, there were only a handful of platform driven companies operating on the market. Zipcar, BlaBlaCar and Couchsurfing among them. Then Airbnb and Uber revolutionized the transportation and hospitality industries with a presence in virtually every major city. Access over ownership is the paradigm shift from the traditional business model that grants individuals the use of products or services without the necessity of buying them. Digital platforms, data and algorithm-driven companies as well as decentralized blockchain technologies have tremendous potential. But they are also changing the rules of the game. One of such technologies challenging the legal system are AI systems that will also reshape the current legal framework concerning the liability of operators, users and manufacturers. Therefore, this introductory chapter deals with explaining and describing the legal issues of some of these disruptive technologies. The chapter argues for a more forward-thinking and flexible regulatory structure. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.20301 |
| By: | Eichacker, Nina |
| Abstract: | While cryptocurrencies have existed since 1990, they have come to increasing prominence after 2009, when BitCoin was created. Since 2009, a proliferation of cryptocurrencies has emerged, prompting both debate and dramatic flurries of economic activity. While some argue that cryptocurrencies may present an alternative to state-backed fiat currencies, others characterize them as volatile financial assets that are used to exploit particularly vulnerable demographic groups. This chapter examines cryptocurrencies through two lenses: a historic-institutionalist account of how they have developed as both a financial asset and an alternative to the traditional centralized financial system based on banks, and a Keynesian analysis of crypto currencies as financial assets particularly prone to the generation of bubbles and crashes. It considers both the ecological and economic fallout from the creation of these assets, as well as lessons that traditional financial institutions may learn from cryptocurrencies and the institutions through which purchasers may access these assets. |
| Date: | 2024–07–26 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:7kyrm |
| By: | Chiara Farronato; Andrey Fradkin; Chris Karr |
| Abstract: | Understanding the behavior of users online is important for researchers, policymakers, and private companies alike. But observing online behavior and conducting experiments is difficult without direct access to the user base and software of technology companies. We introduce Webmunk, an open-source tool designed to make conducting online studies much easier. The user-facing side of Webmunk is a browser extension that can track consumer browsing behavior and experimentally modify consumers experiences as they browse the Internet. It can be installed just like any other browser extension, such as ad blockers. Through this extension, researchers can collect a host of consumer data, from URLs to web page HTML elements, clicks, and scroll positions. The extension can also modify information and change the look of a web page, allowing for researchers to implement interventions that vary across study participants. A key advantage of this approach is that interventions occur while participants are engaging in real world activities such as shopping, browsing the news, using social media, or searching for information. We demonstrate the power of Webmunk by discussing two studies in progress. |
| JEL: | K2 L4 M0 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32694 |
| By: | Salma Arabi (ENCGS - Ecole Nationale de Commerce et de Gestion de SETTAT) |
| Abstract: | The growing integration of fintech, digitalization and blockchain is transforming the Islamic banking landscape, with the promise of more efficient, transparent and accessible banking services. However, to fully realize this potential, several significant challenges must be overcome. These challenges include navigating a complex regulatory environment to ensure compliance with Sharia ethical standards, strengthening the security of financial transactions in a digital environment, quickly adapting existing infrastructure to new technologies, as well as raising awareness and training staff in innovative tools while preserving the values of Islamic finance. Our study aims to assess the potential impact of fintech technologies, digitalization and blockchain on Islamic banks in Morocco. We will explore the potential challenges associated with this integration and provide a detailed roadmap for effective adoption of these technologies. This roadmap will include essential strategic and operational recommendations to guide Moroccan Islamic banks in this crucial transition towards more modern and competitive services, while maintaining their commitment to the ethical and religious principles of Islamic finance. |
| Keywords: | Fintech digitalization blockchain Moroccan Islamic banks challenges roadmap, Fintech, digitalization, blockchain, Moroccan Islamic banks, challenges, roadmap |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04644039 |
| By: | Ohlrogge, Hans Christian; Isselstein, Franz Caspar |
| Abstract: | Security tokens have the potential to reshape finance through blockchain technology. The Boston Consulting Group forecasts a $16 trillion opportunity in tokenizing global illiquid assets by 2030. These tokens offer transparency and efficiency in transactions, enabling fast and decentralized capital raising. However, several factors hinder rapid adoption by the buy and sell sides. Along with regulatory uncertainty, a lack of transparency and liquidity also hampers their progress. To address this, our research investigates the feasibility of creating a security token index as a benchmark for tracking their development. Our findings suggest that constructing such an index, despite certain limitations, is feasible and could provide value to various stakeholders. |
| Keywords: | Blockchain, Security Token, Security Token Market, Security Token Indexation, Security Token Market Limitations |
| JEL: | G17 G20 G30 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iubhbm:300861 |
| By: | Miguel Risco; Manuel Lleonart-Anguix |
| Abstract: | This paper builds a theoretical model of communication and learning on a social media platform, and describes the algorithm an engagement-maximizing platform implements in equilibrium. Such algorithm excessively exploits similarity, locking users in echo chambers. Moreover, learning vanishes as platform size grows large. As this is far from ideal, we explore alternatives. The reverse-chronological algorithm the DSA mandated to reincorporate turns out to be not good enough, so we build the "breaking echo chambers" algorithm, a modification of the platform-optimal algorithm that improves learning by promoting opposite thoughts. Additionally, we seek a natural implementation path for the utilitarian optimal algorithm. This is why we advocate for horizontal interoperability, which interoperability compels platforms to compete based on algorithms. In the absence of platform-specific network effects that entrench users within dominant platforms, the retention of user bases hinges on implementing algorithms that outperform those of competitors. |
| Keywords: | personalized feed, social learning, network effects, interoperability |
| JEL: | D43 D85 L15 L86 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_580 |
| By: | Raphael Porcherot (IDHES - Institutions et Dynamiques Historiques de l'Économie et de la Société - UP1 - Université Paris 1 Panthéon-Sorbonne - UP8 - Université Paris 8 Vincennes-Saint-Denis - UPN - Université Paris Nanterre - UEVE - Université d'Évry-Val-d'Essonne - CNRS - Centre National de la Recherche Scientifique - ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay, 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, Université Sorbonne Paris Nord); Sebastian Valdecantos (AAU - Aalborg University [Denmark]); Ricardo Orzi (Universidad Nacional de Luján [Buenos Aires]); Federico Camargo |
| Abstract: | Social currencies can make a valuable contribution to sustainability as they strengthen solidarity markets, a specific exchange practice that enhances the resilience of their surrounding environmental, social and human systems. Until now, the need to secure trust in a currency has been a major challenge for social currency initiatives not backed by the State. The emergence of Blockchain, which offers security, transparency and auditability to currencies and transactions it supports, seemingly circumvents this issue. This raises the question that this paper seeks to address: is Blockchain a game-changer for bottom-up solidarity economy initiatives? The methodological approach draws on a multidimensional conceptualization of trust that recognizes three components: ethical, hierarchical and methodical trust. It uses Moneda PAR, an Argentinian Blockchain-based social currency, as a case study and draws on use data, participant surveys and direct observation by the authors as action researchers to explore social currency and solidarity economy development in relation to currency performance on each dimension of trust. Findings from the case show that despite strengthening hierarchical and methodical trust, Blockchain needs to be articulated with additional market-building strategies to be a true game-changer in the development of social currency systems. |
| Keywords: | special-purpose money, social currencies, Blockchain, sustainability |
| Date: | 2024–06–29 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04599645 |
| By: | Anders Brownworth; Jon Durfee; Michael Junho Lee; Antoine Martin |
| Abstract: | Blockchain-based systems are run by a decentralized network of participants and are designed to be censorship-resistant. We use sanctions imposed by the U.S. Department of Treasury on Tornado Cash (TC), a smart contract protocol, to study the impact and effectiveness of regulation in decentralized systems. We document an immediate and lasting impact on TC following the sanction announcement, measured by market reaction, transaction volume, and diversity of users. Still, net flows into TC contracts recover to and surpass pre-announcement levels for most pools, supporting viability of TC. Evidence on cooperation at the settlement layer is mixed: the aggregate share of non-cooperative blocks increases over time, but a shrinking number of actors process Tornado Cash transactions, indicating a fragility to the sustainability of censorship-resistance. Non-cooperation is not explained by tokenomics, and changes in perception around legal authority and clarity of regulation appears to be a key factor for whether to cooperate. |
| Keywords: | decentralized systems; digital assets; privacy; regulation; sanctions |
| JEL: | G18 G28 G29 D40 F51 O30 |
| Date: | 2024–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:98635 |
| By: | Michael Callen; Miguel Fajardo-Steinhäuser; Michael G. Findley; Tarek Ghani; Michael J. Callen |
| Abstract: | Can digital payments systems help reduce extreme hunger? Humanitarian needs are at their highest since 1945, aid budgets are falling behind, and hunger is concentrating in fragile states where repression and aid diversion present major obstacles. In such contexts, partnering with governments is often neither feasible nor desirable, making private digital platforms a potentially useful means of delivering assistance. We experimentally evaluated digital payments to extremely poor, female-headed households in Afghanistan, as part of a partnership between community, nonprofit, and private organizations. The payments led to substantial improvements in food security and mental well-being. Despite beneficiaries’ limited tech literacy, 99.75% used the payments, and stringent checks revealed no evidence of diversion. Before seeing our results, policymakers and experts are uncertain and skeptical about digital aid, consistent with the lack of prior evidence on digital payments for humanitarian response. Delivery costs are under 7 cents per dollar, which is 10 cents per dollar less than the World Food Programme’s global figure for cash-based transfers. These savings can help reduce hunger without additional resources, demonstrating how hybrid partnerships utilizing digital platform technologies can help address grand challenges in difficult contexts. |
| Keywords: | hunger, fragility, digital payments |
| JEL: | O12 C93 D02 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11220 |
| By: | Daniel Deisenroth; Utsav Manjeer; Zarak Sohail; Steven Tadelis; Nils Wernerfelt |
| Abstract: | Digital advertising, which uses consumer data to target ads to users, now accounts for most of global ad expenditures. Privacy concerns have prompted regulations that restrict the use of personal data. To inform these policy debates, we develop an equilibrium model of advertising and market structure to analyze the impact of privacy regulation on market outcomes. We test the model’s predictions using the launch of Apple’s App Tracking Transparency feature, which created a natural experiment that limited the use of consumer data. Leveraging data from all U.S. advertisers on Meta combined with offline administrative data, we find that reductions in digital ad effectiveness led to decreases in investments in advertising, increases in market concentration, and increases in product prices. These effects are economically meaningful in magnitude and suggest potential harms to both firms and consumers from privacy regulation. |
| JEL: | D22 D40 L10 L59 M38 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32726 |
| By: | Louis-Daniel Pape; Michelangelo Rossi |
| Abstract: | This paper examines the impact of the Digital Markets Act (DMA) on consumer behavior, focusing on changes in Google’s search result presentation in the European Union (EU). Specifically, it investigates the effects of Google’s removal of clickable maps in search results, a modification implemented in January 2024. This change forces users to perform additional searches to access Google Maps or alternative mapping services, thus increasing search costs. Using a difference-in-differences approach, we compare Google search volumes from EU to non-EU countries before and after the implementation of the DMA. By eliminating Google Maps’ advantage of being only one click away from Google Search users, we find that EU consumers search significantly more for online mapping services. We measure a 25% and 18% increase in Google’s search volume for the query terms maps and google maps, resulting in an excess of 34, 407, 000 and 8, 901, 000 searches over six months, respectively. This search increase suggests potential exposure to alternative mapping services. However, searches for services like apple maps and bing maps also rose, but not as significantly. Moreover, traffic data shows a non-significant decrease in visits to Google Maps, suggesting minimal migration to alternative services. These findings indicate that removing Google’s one-click advantage can lead to higher search costs for users without significantly boosting the discovery or adoption of alternative mapping services in the short run. |
| Keywords: | self-preferencing, online mapping services, Google Maps, Google Search, Digital Markets Act |
| JEL: | L41 L86 K21 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11226 |
| By: | Siyu Chen; Qing Guo |
| Abstract: | Employing a comprehensive survey of micro and small enterprises (MSEs) and the Digital Financial Inclusion Index in China, this study investigates the influence of fintech on MSE innovation empirically. Our findings indicate that fintech advancement substantially enhances the likelihood of MSEs engaging in innovative endeavors and boosts both the investment and outcomes of their innovation processes. The underlying mechanisms are attributed to fintech's role in fostering long-term strategic incentives and investment in human capital. This includes the use of promotions and stock options as rewards, rather than traditional perks like gifts or trips, the attraction of a greater number of university graduates, and the increase in both training expenses and the remuneration of technical staff. Our heterogeneity analysis reveals that fintech exerts a more pronounced effect on MSEs situated in economically developed areas, those that are five years old or younger, and businesses with limited assets and workforce. Additionally, we uncover that fintech stimulates the innovation of MSEs' independent research and development (R\&D) efforts. This paper contributes to the understanding of the nuanced ways in which fintech impacts MSE innovation and offers policy insights aimed at unleashing the full potential of MSEs' innovative capabilities. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.17293 |
| By: | Kogana, Shimon; Makarov, Igor; Niessnerc, Marina; Schoar, Antoinette |
| Abstract: | Trading in cryptocurrencies grew rapidly over the last decade, dominated by retail investors. Using data from eToro, we show that retail traders have different models of the underlying price dynamics of cryptocurrencies relative to other assets: They are contrarian in stocks and gold, yet these same traders follow a buy-and-hold strategy in cryptocurrencies. The differences are not explained by individual characteristics, investor composition, inattention, differences in fees, nor preference for lottery-like stocks. We conjecture that retail investors have a model where cryptocurrency price changes also affect the likelihood of future widespread adoption, which pushes prices further in the same direction. |
| Keywords: | cryptocurrencies; FinTech; retail trading; social finance; Elsevier deal |
| JEL: | G12 G14 |
| Date: | 2024–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:122266 |
| By: | Wagner, Michel; Krüger, Nicolai; Kleffmann, Markus; Teuteberg, Frank |
| Abstract: | Amidst rapid developments in digital financial technologies, the need for effective Decentralized Finance (DeFi) regulation is at the center of discussions. This paper aims to develop a comprehensive taxonomy for DeFi that brings to the forefront the diverse structures and characteristics of protocols and applications and can serve as a basis for developing regulatory policies. A detailed analysis of 144 DeFi projects is conducted using a qualitative research approach with inductive methodology. Based on the analysis, a taxonomy has been developed, which can be used to assist in the design of regulatory policies. From this taxonomy, five ideas are derived which could serve as a potential basis for designing future regulatory measures. In doing so, the work highlights the need to develop appropriate regulations for the DeFi market, which has been mainly unregulated to date. The findings highlight the need for increased international cooperation among countries to achieve a uniform regulatory regime that accommodates the DeFi industry's dynamic developments. The taxonomy approach developed in this research may prove to be a critical tool to foster this international cooperation and promote uniform regulation. |
| Keywords: | Blockchain, DeFi, Regulation, Taxonomy, Decentralized Finance, Dapps |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iubhit:300862 |
| By: | Hongshen Yang; Avinash Malik |
| Abstract: | Cryptocurrency is a cryptography-based digital asset with extremely volatile prices. Around $70 billion worth of crypto-currency is traded daily on exchanges. Trading crypto-currency is difficult due to the inherent volatility of the crypto-market. In this work, we want to test the hypothesis: "Can techniques from artificial intelligence help with algorithmically trading cryptocurrencies?". In order to address this question, we combine Reinforcement Learning (RL) with pair trading. Pair trading is a statistical arbitrage trading technique which exploits the price difference between statistically correlated assets. We train reinforcement learners to determine when and how to trade pairs of cryptocurrencies. We develop new reward shaping and observation/action spaces for reinforcement learning. We performed experiments with the developed reinforcement learner on pairs of BTC-GBP and BTC-EUR data separated by 1-minute intervals (n = 263, 520). The traditional non-RL pair trading technique achieved an annualised profit of 8.33%, while the proposed RL-based pair trading technique achieved annualised profits from 9.94% - 31.53%, depending upon the RL learner. Our results show that RL can significantly outperform manual and traditional pair trading techniques when applied to volatile markets such as cryptocurrencies. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.16103 |
| By: | Geromichalos, Athanasios; Wang, Yijing |
| Abstract: | In monetary theory, money is typically introduced as an object that can help agents bypass frictions, such as anonymity and limited commitment. Consequently, common wisdom suggests that if agents had access to more unsecured credit these frictions would become less severe and welfare would improve. In similar spirit, common wisdom suggests that as societies get access to more alternative (to money) payment instruments, i.e., more ways to bypass the aforementioned frictions, welfare would also increase. We show that for a large variety of settings and market structures this common wisdom is not accurate. If the alternative means of payment is sufficient to cover all the liquidity needs of the economy, then indeed the economy will reach maximum welfare. However, if access to this alternative payment system is relatively low to begin with, increasing it can hurt the economy’s welfare, and we characterize in detail the set of parameters for which this result can arise. Our model offers a simple explanation to a recent empirical literature suggesting that increased access to credit is often followed by declined economic activity. |
| Keywords: | monetary-search models, over-the-counter markets, credit, liquidity, welfare |
| JEL: | E31 E43 E52 G12 |
| Date: | 2024–06–26 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121388 |
| By: | Hongzhou Chen; Xiaolin Duan; Abdulmotaleb El Saddik; Wei Cai |
| Abstract: | Harnessing the transparent blockchain user behavior data, we construct the Political Betting Leaning Score (PBLS) to measure political leanings based on betting within Web3 prediction markets. Focusing on Polymarket and starting from the 2024 U.S. Presidential Election, we synthesize behaviors over 15, 000 addresses across 4, 500 events and 8, 500 markets, capturing the intensity and direction of their political leanings by the PBLS. We validate the PBLS through internal consistency checks and external comparisons. We uncover relationships between our PBLS and betting behaviors through over 800 features capturing various behavioral aspects. A case study of the 2022 U.S. Senate election further demonstrates the ability of our measurement while decoding the dynamic interaction between political and profitable motives. Our findings contribute to understanding decision-making in decentralized markets, enhancing the analysis of behaviors within Web3 prediction environments. The insights of this study reveal the potential of blockchain in enabling innovative, multidisciplinary studies and could inform the development of more effective online prediction markets, improve the accuracy of forecast, and help the design and optimization of platform mechanisms. The data and code for the paper are accessible at the following link: https://github.com/anonymous. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.14844 |
| By: | Bhagyashree, Katare; Yenerall, Jacqueline; Zhao, Shuoli; Wang, Xuejian |
| Abstract: | Technological advancements, such as online grocery shopping, have significantly transformed consumer retail environments and experiences. Effectively studying consumer behavior in these new environments requires the use of novel methodological approaches, which will also aid in the development of interventions to encourage healthy and sustainable consumption. This paper begins by providing an overview of the current literature on novel approaches to analyzing consumer behavior. To contribute to this literature, the paper also examines consumer decision-making pathways within online grocery shopping platforms. Specifically, the paper focuses on exploring the consumers' digital footprints, such as page visits, product additions and removals, and interactions with information labels to identify patterns and interests in consumer responses to healthy and sustainable consumption. The study investigates potential heterogeneities in consumers’ socio-demographics and attitudes, aiming to provide insights for shaping online shopping environments to promote healthy and sustainable food choices. Findings highlight the potential benefits of integrating consumer search tracking data with environment design to facilitate informed and conscious food choices. |
| Keywords: | Food Consumption/Nutrition/Food Safety |
| Date: | 2024–07–26 |
| URL: | https://d.repec.org/n?u=RePEc:ags:cfcp15:344348 |
| By: | Di Lizia, Adam (University of Warwick) |
| Abstract: | How does social influence affect consumer ratings? Using a dataset from the popular Steam gaming platform I investigate how quality judgements depend on pre-existing consumer assessments. In 2019, Steam introduced a new review system which decreased the exposure of users to previous ratings. Firstly, I find that user ratings are dependent on average ratings. A 10 percent increase in average rating increases the probability a review is positive by 5.4% before the policy change, but only by 2.8% after. The result is not due to selection, and is robust to a wide range of alternative specifications. Secondly, the effect is heavily asymmetric: individual reviewers are more negative when exposed to a lower average rating, but do not respond to a higher one. This negativity compounds and inflates the gap between lower rated and higher rated games. Overall, these social influence effects are driven by less experienced users on the platform. Finally, using estimates of owner data, I run a structural model of game choice. A 1% increase in rating is equivalent to a 2.5 dollar price reduction. This suggests social influence has large implications for buyers and sellers. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1505 |
| By: | Shafique Ur Rehman; Touqeer Ahmad; Wu Dash Desheng; Amirhossein Karamoozian |
| Abstract: | This study examines the interdependence between cryptocurrencies and international financial indices, such as MSCI World and MSCI Emerging Markets. We compute the value at risk, expected shortfall (ES), and range value at risk (RVaR) and investigate the dynamics of risk spillover. We employ a hybrid approach to derive these risk measures that integrate GARCH models, extreme value models, and copula functions. This framework uses a bivariate portfolio approach involving cryptocurrency data and traditional financial indices. To estimate the above risks of these portfolio structures, we employ symmetric and asymmetric GARCH and both tail flexible EVT models as marginal to model the marginal distribution of each return series and apply different copula functions to connect the pairs of marginal distributions into a multivariate distribution. The empirical findings indicate that the eGARCH EVT-based copula model adeptly captures intricate dependencies, surpassing conventional methodologies like Historical simulations and t-distributed parametric in VaR estimation. At the same time, the HS method proves superior for ES, and the t-distributed parametric method outperforms RVaR. Eventually, the Diebold-Yilmaz approach will be applied to compute risk spillovers between four sets of asset sequences. This phenomenon implies that cryptocurrencies reveal substantial spillover effects among themselves but minimal impact on other assets. From this, it can be concluded that cryptocurrencies propose diversification benefits and do not provide hedging advantages within an investor's portfolio. Our results underline RVaR superiority over ES regarding regulatory arbitrage and model misspecification. The conclusions of this study will benefit investors and financial market professionals who aspire to comprehend digital currencies as a novel asset class and attain perspicuity in regulatory arbitrage. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.15766 |
| By: | Debuque-Gonzales, Margarita; Corpus, John Paul P. |
| Abstract: | This paper examines financial inclusion in the Philippines, benchmarking it against other developing Asian economies using the latest supply-side and demand-side data. It uses probit regressions on Philippine microdata from the World Bank’s 2021 Global Findex Database, providing a comparative analysis with the country’s regional peers. The study finds the Philippines leading in creating an enabling environment but shows mixed performance in financial outreach and uptake and lagging outcomes in account ownership and usage. Probit regressions reveal positive associations between financial inclusion and individual characteristics like education, income, and employment, and a nonlinear relationship with age. The study uncovers a smaller gender gap in formal account ownership and use and emerging disparities in financial technology access across education and income levels, particularly mobile money. Barriers such as high cost, distance, and lack of trust in financial institutions significantly hinder lower-income households, with Filipinos more affected by these barriers than their Association of Southeast Asian Nations counterparts. |
| Keywords: | Financial inclusion |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:phd:pjdevt:pjd_2024_vol__48_no__1a |
| By: | Toyin B, Ajibade |
| Abstract: | We developed “KasuwaGo” mobile app to remove barriers to market participation in West Africa agri-food value chains. Women's adoption and usage of the app remains low in Nigeria. To deepen usage, we introduced a youth-led market-based agent structure to provide ICT support services in transaction creation and trade facilitation for eighty women managed in eight groups in key markets. About 72.5% of the group members gave no consideration to gender in their choice of agent, as they were more concerned with agent's availability and accessibility. Female-managed groups consummated 18% more transactions than male-managed groups (p<0.05) indicating some level of same-gender affinity on engagements beyond transaction initiation. Although potential trade location counts for group members was higher by 6±1 over a 4-week cycle compared to non-group members, the interaction response time to potential trade partners was lower for non-group members app users who were smart phone owners (p<0.05). We found no significant difference in distance of markets participated in by group and non-group members who were “KasuwaGo” app-users on own-smart-phones. Averagely, women traders were willing-to-pay additional NGN110.13 as monthly subscription for app usage. Our findings suggest that providing marketing ICT support is beneficial to mainstreaming women into priority nodes on food value chains. |
| Keywords: | Marketing |
| Date: | 2024–07–26 |
| URL: | https://d.repec.org/n?u=RePEc:ags:cfcp15:344400 |
| By: | Raviv Murciano-Goroff; Ran Zhuo; Shane Greenstein |
| Abstract: | How prevalent are severe software vulnerabilities, how fast do software users respond to the availability of secure versions, and what determines the variance in the installation distribution? Using the largest dataset ever assembled on user updates, tracking server software updates by over 150, 000 medium and large U.S. organizations between 2000 and 2018, this study finds widespread usage of server software with known vulnerabilities, with 57% of organizations using software with severe security vulnerabilities even when secure versions were available. The study estimates several different reduced-form models to examine which organization characteristics correlate with higher vulnerability prevalence and which update characteristics causally explain higher responsiveness to the releases of secure versions. The disclosure of severe vulnerability fixes in software updates does not jolt all organizations into installing them. Factors related to the cost of updating, such as whether the software is hosted on a cloud-based platform and whether the update is an incremental change or a major overhaul, play an important role. Observables cannot easily explain much variation. These findings suggest that there could be high returns to incorporating organizations' relative (in)attentiveness to act on software update releases into the design of cybersecurity policies. |
| JEL: | D29 L86 M15 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32696 |
| By: | Abdulnasser Hatemi-J |
| Abstract: | Reducing financial risk is of paramount importance to investors, financial institutions, and corporations. Since the pioneering contribution of Johnson (1960), the optimal hedge ratio based on futures is regularly utilized. The current paper suggests an explicit and efficient method for testing the null hypothesis of a symmetric optimal hedge ratio against an asymmetric alternative one within a multivariate setting. If the null is rejected, the position dependent optimal hedge ratios can be estimated via the suggested model. This approach is expected to enhance the accuracy of the implemented hedging strategies compared to the standard methods since it accounts for the fact that the source of risk depends on whether the investor is a buyer or a seller of the risky asset. An application is provided using spot and futures prices of Bitcoin. The results strongly support the view that the optimal hedge ratio for this cryptocurrency is position dependent. The investor that is long in Bitcoin has a much higher conditional optimal hedge ratio compared to the one that is short in the asset. The difference between the two conditional optimal hedge ratios is statistically significant, which has important repercussions for implementing risk management strategies. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.19932 |
| By: | Ubeda, Fernando; Mendez, Alvaro; Forcadell, Francisco Javier; López, Belén |
| Abstract: | This paper investigates the impact of multinational banks (MNBs) implementing socially sustainable practices on financial inclusion in developing countries. We argue that the specific characteristics of the MNBs, when combined with socially sustainable practices, contribute to building trust and reducing risks in developing countries where they operate. This positive externality causes improvements for the underprivileged in three dimensions of financial inclusion: their demand for bank accounts, their propensity to save, and their access to credit. A sample of 152 multinational banks in 32 developing countries and 37, 952 individuals proves the positive effect of sustainable practices. |
| Keywords: | ESG criteria; sustainable banking; financial inclusion; multinational banks; SDGs; social sustainability |
| JEL: | F3 G3 |
| Date: | 2024–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:124260 |
| By: | Vilgis, Veronika; Jordán, Valeria; Patiño, Alejandro |
| Abstract: | The adoption of digital technologies is a crucial tool for bridging the productivity gaps between countries in Latin America and the Caribbean and more developed nations, generating new sources of growth, and creating high-quality jobs. Evidence-based policies are needed to harness the potential of these technologies, guide technological change, seize opportunities and mitigate risks. This publication presents an exploratory study conducted in Brazil, Chile, Colombia and Mexico, in which various sources of information are combined, including web data and official statistics, to measure the online activity of businesses. This methodology allows companies to be classified based on their Internet use, going beyond traditional industrial classifications and giving rise to a new classification. Moreover, the study explores the possibilities offered by big data techniques and tools for enhancing our understanding of the digital transformation and serves as a foundation for future research in this field. |
| Date: | 2024–06–13 |
| URL: | https://d.repec.org/n?u=RePEc:ecr:col022:80415 |
| By: | Abdul Jabbar; Syed Qaisar Jalil |
| Abstract: | This study evaluates the performance of 41 machine learning models, including 21 classifiers and 20 regressors, in predicting Bitcoin prices for algorithmic trading. By examining these models under various market conditions, we highlight their accuracy, robustness, and adaptability to the volatile cryptocurrency market. Our comprehensive analysis reveals the strengths and limitations of each model, providing critical insights for developing effective trading strategies. We employ both machine learning metrics (e.g., Mean Absolute Error, Root Mean Squared Error) and trading metrics (e.g., Profit and Loss percentage, Sharpe Ratio) to assess model performance. Our evaluation includes backtesting on historical data, forward testing on recent unseen data, and real-world trading scenarios, ensuring the robustness and practical applicability of our models. Key findings demonstrate that certain models, such as Random Forest and Stochastic Gradient Descent, outperform others in terms of profit and risk management. These insights offer valuable guidance for traders and researchers aiming to leverage machine learning for cryptocurrency trading. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.18334 |