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Payment instruments, finance and development

Beck, T., Uras, B. R., Ramrattan, R and Pamuk, H. (2018). Payment instruments, finance and development. Journal of Development Economics, doi: 10.1016/j.jdeveco.2018.01.005

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.

Publication Type: Article
Additional Information: © 2018 The Authors. Published by Elsevier B.V. This article is published Open Access. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: Payment technologies, Theft, Trade credit, Allocations
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/19177
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