Monetary theory and electronic money : reflections on the Kenyan experience
This article uses a class of models of money and the payments system to inform an analysis of "mobile banking" in the context of the rapid expansion of M-PESA, a new technology in Kenya that allows payments via mobile phones (even without any access to a bank account), and currently reaches close to 38 percent of Kenyan adults. The separation of households and firms in space and time suggests, in theory, from various separate models, a number of implications. These include (i) the potential gain, under some circumstances, from allowing net e-money credit creation, (ii) the impact that the associated enhancement of credit markets can have on monetary policy and on the real economy, (iii) the roles that e-money could play not only in credit but also in insurance, unrelated to its payment function, (iv) the potential role for an activist monetary policy and e-money management, (v) the role of e-money as a circulating private debt and as a store of value though with potential coordination problems associated with achieving balanced security transformation, (vi) the potential welfare losses from insisting on continuous net clearing of cash and e-money and the difficulty, in any event, of achieving this in practice, and (vii) the management of shortages in the context of fixed rates of exchange of e-money for cash. We provide some summary statistics from data collected on M-PESA agents and users that are reminiscent of the environments of the models and that support some of these implications. Other implications of the models suggest reforms to enhance the system's efficiency.
Volume (Year): (2010)
Issue (Month): 1Q ()
|Contact details of provider:|| Web page: http://www.richmondfed.org/|
More information through EDIRC
|Order Information:|| Web: http://www.richmondfed.org/publications/ Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fuerst, Timothy S., 1992. "Liquidity, loanable funds, and real activity," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 3-24, February.
- William Jack & Tavneet Suri, 2011. "Mobile Money: The Economics of M-PESA," NBER Working Papers 16721, National Bureau of Economic Research, Inc.
- Hiroshi Fujiki & Migiwa Tanaka, 2009. "Demand for Currency, New Technology and the Adoption of Electronic Money: Evidence Using Individual Household Data," IMES Discussion Paper Series 09-E-27, Institute for Monetary and Economic Studies, Bank of Japan.
- Grossman, Sanford & Weiss, Laurence, 1983. "A Transactions-Based Model of the Monetary Transmission Mechanism," American Economic Review, American Economic Association, vol. 73(5), pages 871-80, December.
- Peter N. Ireland, 1994. "Money and the gain from enduring relationships in the turnpike model," Working Paper 94-07, Federal Reserve Bank of Richmond.
- Edward J. Green, 1996.
"Money and Debt in the Structure of Payments,"
9609002, EconWPA, revised 09 Sep 1996.
- Green, Edward-J, 1997. "Money and Debt in the Structure of Payments," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 15(1), pages 63-87, May.
- Edward J. Green, 1999. "Money and debt in the structure of payments," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 13-29.
- Kevin Foster & Erik Meijer & Scott Schuh & Michael A. Zabek, 2010. "The 2008 Survey of Consumer Payment Choice," Public Policy Discussion Paper 09-10, Federal Reserve Bank of Boston.
- Manuelli, Rodolfo & Sargent, Thomas J., 2010. "Alternative Monetary Policies In A Turnpike Economy," Macroeconomic Dynamics, Cambridge University Press, vol. 14(05), pages 727-762, November.
- David Cass & Menahem E. Yaari, 1965.
"A Re-Examination of the Pure Consumption Loans Model,"
Cowles Foundation Discussion Papers
195, Cowles Foundation for Research in Economics, Yale University.
- David Cass & Menahem E. Yaari, 1966. "A Re-examination of the Pure Consumption Loans Model," Journal of Political Economy, University of Chicago Press, vol. 74, pages 353.
- Jeffrey M. Lacker, 1997.
"Clearing, settlement, and monetary policy,"
97-01, Federal Reserve Bank of Richmond.
- Townsend, Robert M, 1989. "Currency and Credit in a Private Information Economy," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1323-44, December.
- Townsend, Robert M, 1987. "Economic Organization with Limited Communication," American Economic Review, American Economic Association, vol. 77(5), pages 954-71, December.
- Freeman, Scott, 1996. "The Payments System, Liquidity, and Rediscounting," American Economic Review, American Economic Association, vol. 86(5), pages 1126-38, December.
- Ricardo de O. Cavalcanti & Neil Wallace, 1999. "A model of private bank-note issue," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 104-136, January.
When requesting a correction, please mention this item's handle: RePEc:fip:fedreq:y:2010:i:1q:p:83-122:n:v.96no.1. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (William Perkins)
If references are entirely missing, you can add them using this form.