Demand for Currency, New Technology and the Adoption of Electronic Money: Evidence Using Individual Household Data

Accurate information on money demand is essential for evaluation of monetary policy. In this regard, it is important to study the effect of financial innovation to money demand. We investigate the effect of a new form of such technology, electronic money, to money demand. Specifically, we estimate currency demand functions conditional on electronic money adoption using unique household-level survey data from Japan. We obtain the following results. First, currency demand indicates that average cash balances do not decrease with the adoption of electronic money. Rather, it seems to increase under some specifications. Second, households at the lowest quantile of the cash balance distribution tend to have higher cash balances after adopting of electronic money. These findings indicate that consumers do not significantly substitute cash holding with e-money holding despite the rapid diffusion of electronic money among households.Currency Demand, Transaction Demands for Money, Electronic Money

Electronic trading systems and intraday non-linear dynamics : an examination of the FTSE 100 cash and futures returns

This paper focuses on dynamic interactions of equity prices among theoretically related assets. We explore the existence of intraday non-linearities in the FTSE 100 cash and futures indices. We test whether the introduction of the electronic trading systems in the London Stock Exchange in 1997 and in the London International Financial Futures and Options Exchange (LIFFE) in 1999 has eliminated the non-linear dynamic relationship in the FTSE 100 markets. We show that the introduction of the electronic trading systems in the FTSE 100 markets has increased the efficiency of the markets by enhancing the price discovery process, namely by facilitating the increase of the speed of adjustment of the futures and cash prices to departures of the mispricing error from its non-arbitrage band. Nevertheless, we conclude that the automation of the markets has not completely eliminated the non-linear properties of the FTSE 100 cash and futures return series. JEL Classification: G12, G14, G1

A modularized electronic payment system for agent-based e-commerce

With the explosive growth of the Internet, electronic-commerce (e-commerce) is an increasingly important segment of commercial activities on the web. The Secure Agent Fabrication, Evolution & Roaming (SAFER) architecture was proposed to further facilitate e-commerce using agent technology. In this paper, the electronic payment aspect of SAFER will be explored. The Secure Electronic Transaction (SET) protocol and E-Cash were selected as the bases for the electronic payment system implementation. The various modules of the payment system and how they interface with each other are shown. An extensible implementation done using JavaTM will also be elaborated. This application incorporates agent roaming functionality and the ability to conduct e-commerce transactions and carry out intelligent e-payment procedures

Anonymity Analysis of Cryptocurrencies

Cash in the real world allows for parties to exchange currency without the need to go through some sort of central authority. One person, Alice, can simply hand cash over to another person, Bob. In this transaction the only two people that have knowledge of this exchange are Alice and Bob. Until recently there was no electronic equivalent to this exchange. In 1982 David Chaum proposed a system of anonymous electronic cash based on blind signatures, and in 1990 founded DigiCash as an electronic cash company. There were a few banks that implemented electronic cash systems, but these banks and DigiCash ultimately went bankrupt in 1997 and 1998 despite the enthusiasm surrounding anonymous electronic cash. Between 1998 and 2008 there were no successful implementations of electronic cash that offer a decentralized, anonymous, and untraceable system. In 2008 a paper was published by Satoshi Nakamoto on the cryptocurrency known as Bitcoin. A cryptocurrency is a form of electronic cash backed by mathematical and cryptographic constructs, unlike traditional currency which was historically backed by gold or silver. Cryptocurrencies have seen rising popularity in recent years due to their decentralized, distributed, peer-to-peer protocols. Part of this rising popularity is also attributable to the supposed anonymity of these protocols; however, due to the public transaction history required for these protocols and the fact that transactions are pseudonymous and not purely anonymous, this supposed anonymity does not exist. While the systems may achieve the goal of decentralized currency it does not achieve the goal of untraceability. In this thesis we analyze the technical implementations of Bitcoin and other cryptocurrencies to determine the level of anonymity provided by these protocols. We also analyze proposed improvements for their feasibility

Trends in the use of payment instruments in the United States

In 2003, for the first time, the number of electronic payments in the United States exceeded the number of check payments--a result of substantial growth in electronic payments (especially by debit card) and a decline in check payments. The shift toward electronic payments suggests that, as with other large economies, many payments formerly made by check are now being made with electronic payment instruments. As in past years, however, the value of checks far exceeded the value of commonly used electronic payments. ; Comparisons among groups of depository institutions of different types and sizes suggest that the distribution of payments of different types is linked in part to the types of customers those institutions tend to serve. For example, at credit unions, which generally serve individuals rather than businesses, checks accounted for a smaller proportion of account debits, and debit card payments and ATM withdrawals accounted for a larger proportion, than at institutions of other types. ; Overall, "on us" check payments, those for which the payer and payee used the same institution, declined slightly. The rate at which checks are returned also declined, while the rate of returned ACH payments--almost twice that of checks--increased, in part because of new types of ACH payments, including ACH transactions initiated with a check. ; Data gathered in 2004 also reveal some differences among geographic regions. Debit card use was substantially greater, and check use substantially lower, in the West than in other regions. In contrast, debit card use was considerably less common in the Northeast, and the decline in check payments since 2000 was less pronounced in that region. ; Indirect evidence--data on ATM withdrawals and cash back from debit card payments--suggests that cash remains a popular means of making payments. Industry data showing increases in ATMs and ATM transactions appear to reflect a shift toward greater use of ATMs and less use of checks to obtain cash, and do not necessarily indicate an increase in the use of cash.Payment systems ; Checks