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.
| Original language | English |
|---|---|
| Place of Publication | Tilburg |
| Publisher | CentER, Center for Economic Research |
| Number of pages | 54 |
| Volume | 2022-032 |
| Publication status | Published - 1 Dec 2022 |
Publication series
| Name | CentER Discussion Paper |
|---|---|
| Volume | 2022-032 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 8 Decent Work and Economic Growth -
SDG 17 Partnerships for the Goals
Keywords
- E-money
- M-Pesa
- Risk-sharing
- welfare
- Monetary Policy
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