Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/267905 
Year of Publication: 
2022
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 15/2022
Publisher: 
Bank of Finland, Helsinki
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.
Subjects: 
E-Money
M-Pesa
Risk-Sharing
Welfare
Monetary Policy
JEL: 
E41
E44
G23
O11
ISBN: 
978-952-323-428-4
Document Type: 
Working Paper

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