Payment choice and currency use: Insights from two billion retail transactions

Using three years of transactions data from a discount retailer with thousands of stores, we study payment variation along three dimensions: transaction size and location; weekly and monthly frequencies; and longer time horizons. In each case, we connect empirical patterns to theories of money demand and payments. We show that cross-sectional and time-series payment patterns are consistent with a theoretical framework in which individual consumers choose between cash and non-cash payments based on a threshold transaction size, and we evaluate factors that may account for the variation in threshold distributions across locations and time.     

移动支付对家庭货币需求的影响——来自中国家庭金融调查的微观证据

本文运用2017年中国家庭金融调查(CHFS)数据,基于鲍莫尔—托宾模型研究了移动支付对家庭货币需求的影响。为了克服移动支付的内生性,本文选取工具变量,用两阶段最小二乘法(2SLS)进行了估计。研究发现,相较于没有移动支付的家庭,拥有移动支付的家庭现金在金融资产的占比下降25%,对其他层次的货币需求也有显著的负向影响,表明移动支付的使用减少了家庭不同层次的货币需求。机制分析表明,交易成本变化是导致移动支付影响现金需求的重要渠道。进一步,本文用分位数回归发现,移动支付对预防性货币需求的影响大于交易性货币需求。移动支付对货币需求的影响在不同的年龄水平、教育水平、城乡地区、东中西部地区和不同城市之间也存在显著差异。本文的研究为理解中国家庭货币需求的变化提供了新的证据,可为相关政策的制定提供参考。     

Output and employment in a macro model with discrete transaction costs

The paper develops a macro model for determining output and employment when discrete transaction costs exist for paying wages and for purchasing commodities. Household labor supply is a function of an effective real wage, which modifies the apparent real wage to take account of the length of the payment period and the costs associated with buying and holding commodities. Firm labor demand is derived in a model where there are lumpy payroll costs associated with making wage payments. The behavior of households and firms is brought together in a market-clearing framework to determine the values of the real wage, employment and output, as well as the time intervals between wage payments and purchases of commodities. The effects of changes in the transaction and holding cost parameters are then examined by comparative-static techniques. An increase in any of these cost parameters turns out to reduce output and the amount of labor employed in production, but also tends to raise the amount of labor absorbed by the process of transacting. The tendency of transaction labor to move in the opposite direction from production labor implies that the net effects on total work are ambiguous.     

Empirical evidence on payment media costs and switch points

This paper recovers micro cost schedules of consumers’ payment instruments from aggregate transaction costs. We assume that only two moments of the size distribution of payments matter: the number and volume of transactions. These variables explain the transaction costs of currency and debit card payments with much precision for a representative 1998 sample of Dutch retailers. The results imply that low fixed transaction costs favor currency for small transactions, while low variable transaction costs favor debit card payments for large transactions. The switch point is 30 Euros, but including the hidden costs of currency would lower it to 13 Euros.     

Automobile replacement: a dynamic structural approach

This article specifies and estimates a structural dynamic model of consumer demand for new and used durable goods. Its primary contribution is to provide an explicit estimation procedure for transaction costs. Identification of transaction costs is achieved from the variation in the share of consumers choosing to hold a given car type each period, and from the share of consumers choosing to purchase the same car type that period. Specifically, I estimate a random‐coefficient discrete‐choice model that incorporates a dynamic optimal stopping problem. I apply this model to evaluate the impact of scrappage subsidies on the Italian automobile market.     

Revenue maximizing inflation

A classic monetary policy result is that revenue maximization entails setting the inflation tax rate equal to the inverse of the interest semi-elasticity of the demand for money. The standard approach underlying “Cagan's rule” is partial equilibrium in nature, treating money demand as being given from outside the model and abstracting from the real effects of inflation. This paper reconsiders the question of the revenue maximizing inflation rate in a general equilibrium framework with a labor-leisure choice, where money is held because it reduces transactions costs. In this framework, the revenue maximizing inflation tax rate is lower than that implied by Cagan's rule.     

The Total Cost of Transactions on the NYSE

This paper develops a measure of execution costs (market impact) of transactions on the NYSE. The measure is the volume-weighted average price over the trading day. It yields results that are less biased than measures that use single prices, such as closes. The paper then applies this measure to a data set containing more than 14,000 actual trades. We show that total transaction costs, commission plus market impact costs, average twenty-three basis points of principal value for our sample. Commission costs, averaging eighteen basis points, are considerably higher than execution costs, which average five basis points. They vary slightly across brokers and significantly across money managers. Though brokers do not incur consistently high or low transaction costs, money managers experience persistently high or lost costs. Finally, the paper explores the possible tradeoff between commission expenditures and market impact costs. Paying higher commissions does not yield commensurately lower execution costs, even after adjusting for trade difficulty. We cannot determine whether other valuable brokerage services are being purchased with higher commission payments or whether some money managers really are inefficient consumers of brokerage trading services.     

我国税收征管制度变迁的路径选择——基于税收征纳交易费用的分析

与发达国家相比,我国征税费用过高;不同地区间税收征收成本差别较大;征税费用与纳税费用的比例不平衡并经常相互转化;由"寻租"、"设租"导致的税款流失严重。这些现象说明,我国的税收征蚋交易费用还不够合理。建议通过推进征纳系统的信息化、组织结构的扁平化、征税流程的精细化等有效措施,来实现我国以节约税收征纳交易费用为导向的税收征管制度变迁。     

Money and credit in liquidity provision

This paper studies the liquidity provision in a model where the roles of money are challenged by other financial instruments. Alternative to money, credit can be used as means of payment and rate dominating assets are available to serve as stores of value. Two features are found to be crucial in rendering money valuable in this environment: information asymmetry in credit trading relationship and uncertainty in individuals' liquidity demand. In general, the model economy can display a payment mechanism of money-only, credit-only, or mixed-use of money and credit in transactions, depending on the severity of the information asymmetry. The optimal quantity of money in our paper is shown to contrast those in other monetary models.     

The Use of Electronic Funds Transfers to Capture the Effects of Cash Management Practices on the Demand for Demand Deposits: A Note

The rapidly increasing use of more sophisticated cash management practices is a factor influencing the demand for money that is not considered in standard models of money demand. Within the framework of an inventory theoretic model of money demand, this paper provides theoretical grounds for using the number of electronic funds transfers as an indication of increasing cash management sophistication. Specifically, the demand for demand deposits is determined from the solution of a simultaneous equation system that also determines the optimal level of cash management. Therefore, the level of cash management services influences transactions costs, implying that transactions costs are endogenous. The number of electronic funds transfers is closely linked to the level of cash management services and is therefore related to transactions costs. Models of money demand that treat transactions costs as exogenous and fixed are therefore misspecified and will not perform well when transactions costs are changing. By explicitly incorporating the changing nature of transactions costs through the use of electronic funds transfers, the problems of instability and poor predictive power associated with the demand for money in the 1970's are overcome.     

Short-run money demand

The conventional wisdom holds that the short-run demand for money is unstable. This paper challenges the conventional view by finding a stable demand for M1 in U.S. data from 1959 through 1993. The approach follows previous work in interpreting long-run money demand as a cointegrating relation, and it uses Goldfeld's partial-adjustment model to interpret short-run dynamics. The key innovation is the choice of the interest rate in the money demand function. Most previous work uses a short-term market rate, but this paper uses the average return on “near monies”—the savings accounts and money market mutual funds that are close substitutes for M1. This choice helps rationalize the behavior of money demand; in particular, the increase in the volatility of velocity after 1980 is explained by increased volatility in the returns on near monies.     

A note on the price- and cost structure of retail payment services in the Swedish banking sector 2002

We estimate private costs in the Swedish banking sector for the production of payment services and investigate to what extent the price structure reflects the estimated cost structure. We find that (i) banks tend to use two-part tariffs but (ii) variable costs are poorly reflected in transaction fees towards both consumers and corporate customers. (iii) There exist large cross subsidies between different payment services, foremost from acquiring card payments to cash distribution to the public, while payment services as a whole are not subsidized.     

中国国际收支与货币供给关联性的实证分析:1996～2007

现阶段中国国际收支影响货币供给的传导机制为:货币需求机制和汇率安排机制。前者最终通过国际储备表现出来,而国际储备又通过"汇率安排途径"影响基础货币,最终影响货币供给量。实证分析结果表明:从静态考察,外汇储备与货币供给、外汇占款与基础货币呈高度正向关联性;从动态考察,随着外汇储备和外汇占款的增加,两者分别对货币供给和基础货币的作用效力不断增大。基于此,在汇率稳定目标下,要减轻国际收支对货币供给的不适宜冲击,应主要从平衡国际收支和推进外汇储备管理体制改革着手,并兼顾国际收支失衡对货币供给扩张和收缩两方面的影响。     

Why do banks promise to pay par on demand?

We survey the theories on why banks promise to pay par on demand and examine evidence on the conditions under which banks have promised to pay the par value of deposits and banknotes on demand when holding only fractional reserves. The theoretical literature is divided into four strands: liquidity provision; asymmetric information; legal restrictions; and a medium of exchange. We assume that it is not zero cost to make a promise to redeem a liability at par value on demand. If so, then the conditions in the theories that result in par redemption are possible explanations why banks promise to pay par on demand. If the explanation based on customers’ demand for liquidity is correct, payment of deposits at par will be promised when banks hold assets that are illiquid in the short run. If the asymmetric-information explanation based on the difficulty of valuing assets is correct, the marketability of banks’ assets determines whether banks promise to pay par. If the legal restrictions explanation of par redemption is correct, banks will not promise to pay par if they are not required to do so. If the transaction explanation is correct, banks will promise to pay par if the deposits are used in transactions. We examine the history of banking in several countries in different eras: fourth century Athens, medieval Italy, Tokugawa Japan, and free banking and money market mutual funds in the United States. Each of the theories explains some of the observed banking arrangements and none explains all of them.     

中国货币政策工具选择研究

本文在普勒规则研究的基础上进行适当扩展,对我国货币政策工具选择问题展开研究。通过研究本文发现:第一,货币政策工具的选择,与经济体所承受的冲击主要来自商品需求层面还是货币需求层面、货币需求主要来自商品市场还是货币市场以及总需求相对名义利率水平的弹性系数相关,而与社会福利损失函数中通货膨胀的厌恶系数、商品市场供给层面的诸变量(包括商品市场供给层面的冲击、商品供给曲线的斜率等)无关;第二,当经济体的所受冲击主要来自商品需求层面、市场货币需求主要来自商品市场、且货币政策对总需求的调节作用效果较小时,则货币当局采用数量型货币政策工具更有利于维护公众的社会福利;反之,则价格型货币政策操作更有利于维护公众的社会福利。     

上下级税务机关间的交易成本与契约选择

通过对上下级税务机关之间出现交易成本的原因的分析,我们发现上下级税务机关之间的信息不对称、上下级税务机关之间的效用函数不一致以及下级税务机关的机会主义行为是导致税务机关之间出现高昂的交易成本的根本原因。对固定工资契约、分成契约和税收计划契约进行比较研究,可以看出税收计划契约是一个能有效地节约交易成本的契约安排,因而也是在现有条件下税务机关做出的一个理性选择。     

Financial innovation,new assets,and the behavior of money demand

Two fundamental changes in US banking regulations have affected the behavior of money demand (M1). The first authorized checkable deposit accounts paying explicit interest rates. The second allowed these rates to be market determined. The theoretical literature does not directly address the impact of these events, suggesting that they are primarily an empirical issue. However, the empirical literature has yet to agree on the impact of financial innovation on money demand; for example, several studies report an increase in the elasticity of money demand, several others report a decline. This paper uses a Lancaster-type choice model to analyze formally the expected impact of these two changes on the demand for money. The model derives specific conditions under which (i) the demand for money increases as new assets are introduced and (ii) the impact of either the introduction of new assets or the elimination of interest rate restrictions on the elasticity of money demand.     

On short-term institutional trading skill,behavioral biases,and liquidity need

Are portfolio managers skilled or do they trade too much? Using a marked-to-market based “fair-value” method for measuring fund manager skill, we find that institutional managers can potentially earn +42 (+33) basis points benchmark-adjusted return before transaction costs after a holding period of four weeks on their buy (sell) trades. After transaction costs, the benchmark-adjusted return for the buy (sell) trades is +1 (-8) basis points. Pension fund managers outperform money managers. We are unable to detect evidence for overconfidence among pension fund managers over this short-horizon. In addition, we are unable to find evidence of disposition effect among mutual fund managers. Institutions tend to engage in short-term trades with holding period of four weeks (or less) despite only breaking-even or making economically insignificant (modest) benchmark-adjusted losses after round-trip transaction costs for liquidity, risk-management, or tax-minimization reasons. Among these, evidence for liquidity trading motive is the strongest.     

The effects of relative price changes on the household's demand for money

In examining the economic response to changes in the rate of inflation, models of the demand for money have traditionally assumed that all prices change equiproportionately. This paper alternatively examines the effect on the demand for money of relative price changes. The analysis develops a choice theoretic framework of household behavior by combining a utility maximization framework with the inventory approach to the transactions demand for money. A significant result of the analysis is that the net effect of a change in relative prices on the household's money holding depends on the purchase frequencies and price elasticities of the relevant commodities.     

Do momentum-based trading strategies work in emerging currency markets?

We appear to be the first to present correctly calculated results for the profitability of emerging currency momentum strategies using a long time series and a good cross-sectional sample. Using a 1985–2009 sample period and six emerging currencies, we find that long-short momentum strategies gained about 1–3% per annum after actual transaction costs. These profits declined through time (both economically and statistically), however, with most of our strategies losing money after transaction costs during the last five years of our sample. These results are similar to, though slightly more volatile in the cross section, than those published for major currencies.