Money, e-money and consumer welfare

Francesco Carli and Burak Uras

No 15/2022, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: We develop a micro-founded monetary model to inquire the role of a privately provided e-money instrument for household consumption smoothing and welfare. Different from fiat money, e-money users pay electronic transaction fees, but in turn e-money reduces spatial separation frictions and enables risk-sharing. We characterize the conditions that promotes e-money to be Pareto improving and the conditions when e-money reduces its users' welfare - despite for the consumption-smoothing it induces. We calibrate our model for the context of M-Pesa in Kenya and conduct a quantitative analysis. Since our quantitative analysis reveals a limited role for privately provided e-money, we recommend the optimality of e-money regulation.

Keywords: E-Money; M-Pesa; Risk-Sharing; Welfare; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E41 E44 G23 O11 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-dge, nep-mfd, nep-mon and nep-pay
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https://www.econstor.eu/bitstream/10419/267905/1/1830159186.pdf (application/pdf)

Related works:
Working Paper: Money, E-money, and Consumer Welfare (2022)
Working Paper: Money, E-money, and Consumer Welfare (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:152022

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