IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v71y2025i7p5605-5624.html
   My bibliography  Save this article

The Liquidity Premium of Digital Payment Vehicle

Author

Listed:
  • Zefeng Chen

    (Guanghua School of Management, Peking University, Beijing 100871, China)

  • Zhengyang Jiang

    (Kellogg School of Management, Northwestern University, and NBER, Evanston, Illinois 60208)

Abstract

Do digital payment technologies generate liquidity premia like cash and Treasury? We provide an estimate in the context of the world’s largest digital payment platform, Alipay. Our empirical strategy exploits the variation in the timing of the introduction of money market funds that users on this platform can hold and use for digital transactions. We find that, once a fund becomes eligible for these transactions, its size increases by 45 times on average. Through the lens of an equilibrium demand system model, we show that this size increase implies a liquidity premium of 0.8% per annum. This result provides a unique perspective for understanding and calibrating the liquidity premium of digital currencies.

Suggested Citation

  • Zefeng Chen & Zhengyang Jiang, 2025. "The Liquidity Premium of Digital Payment Vehicle," Management Science, INFORMS, vol. 71(7), pages 5605-5624, July.
  • Handle: RePEc:inm:ormnsc:v:71:y:2025:i:7:p:5605-5624
    DOI: 10.1287/mnsc.2023.01309
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.2023.01309
    Download Restriction: no

    File URL: https://libkey.io/10.1287/mnsc.2023.01309?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:71:y:2025:i:7:p:5605-5624. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.