Payment Instruments, Finance and Development

T.H.L. Beck, H. Pamuk, R.B. Uras, R. Ramrattan

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Abstract

This paper studies the effects of a payment technology innovation (mobile money) on entrepreneurship and economic development in a quantitative dynamic general equilibrium model. In the model mobile money dominates fiat money as a medium of exchange, since it avoids the risk of theft, but comes with electronic transaction costs. We show that entrepreneurs with higher productivity and access to trade credit are more likely to adopt mobile money as a payment instrument vis-a-vis suppliers. Calibrating the stationary equilibrium of the model to match firm-level data from Kenya, we show significant quantitative implications of mobile
money for entrepreneurial growth and macroeconomic development.
Original languageEnglish
Place of PublicationTilburg
PublisherTilburg University
Number of pages73
Publication statusPublished - 2018

Publication series

NameDFID Working Paper

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Keywords

  • payment technologies
  • theft
  • trade credit
  • allocations

Cite this

Beck, T. H. L., Pamuk, H., Uras, R. B., & Ramrattan, R. (2018). Payment Instruments, Finance and Development. (DFID Working Paper). Tilburg University.