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The Future of Payment Transactions: The Convenience and Security of Mobile Payments
by Shane Cashin
Abstract
This study aims to evaluate the American consumers drive for payment choice. With cash, credit, and debit still covering most of the payment transactions that occur across the country every day, there has been a trend toward the use of mobile payments as the technology improves and more businesses have started to offer these capabilities. We use the Federal Reserve’s Survey of Consumers’ Use of Mobile Financial Services to analyze some of the most recent data pertaining to consumer payment preference in order to evaluate the importance of m-payment accessibility, convenience, comfort, and perceived level of security. Using a logistic regression analysis, this study finds that as one of the primary obstacles preventing the widespread adoption of mobile payments, security does play a major role in the consumers’ decision to use (or not use) mobile payments today.
Advisor: Grace Kim | No JEL Codes on File at this time
Adoption Subsidy, Foster Care Payment, and Foster Care Adoption: A Two-stage Least Squares Approach
By Chun Sun Bak
This paper examines the effect of the change in the magnitude of monthly governmental adoption subsidy on the adoption rate for foster children in foster family structures. In order to account for omitted variable bias attached to the amount of subsidy that a child receives, I construct an instrumental variable that takes advantage of the fact that each state has different policies on: (1) the base age from which a child is eligible for special needs; and (2) the amount of increased adoption subsidy that a child receives, on average, if he or she is eligible for special needs adoption. Using the data from the Adoption and Foster Care Analysis and Reporting System (AFCARS) during the years 2001 to 2012, I find that a dollar increase in the amount of adoption subsidy, holding the amount of foster care payment constant, is expected to increase a foster child’s probability of adoption by 0.255%. Although the positive sign of the coefficient is intuitive, and although it is statistically significant at all levels, its magnitude is unrealistically high, suggesting that there may be a problem in the instrument itself or in the accuracy and selection of the data.
Advisor: Alison Hagy, Allan Collard-Wexler | No JEL Codes on file at this time
Assessing the Effects of Earnings Surprise on Returns and Volatility with High Frequency Data
By Sam Lim
This paper aims to explore how “earnings surprise”—the difference between earnings
estimates and the actual announced earnings—affects a stock’s volatility and returns using
high frequency data. The results show that earnings surprise is significantly correlated with volatility and overnight returns. Furthermore, an earnings surprise is significantly correlated with an increase in volatility in the trading period immediately following the earnings announcement, but there is no bias indicating which directions prices will go. Even with no “surprise”, the announcement tends to be followed by this increase in volatility. The findings suggest the importance of earnings on equity price valuation.
Advisor: George Tauchen, Tim Bollerslev
Currency Crisis Early Warning Systems: Robust Adjustments to the Signal-Based Approach
By Andrew Kindman
This research proposes and tests several novel strategies for enhancing the strength of conventional, signal-based currency crisis Early Warning Systems (EWS). Using country level, monthly macroeconomic time-series data, it develops an algorithmic process for identifying periods of elevated currency crisis risk and achieves robust results. The proposed changes to current EWS include: 1) an adjustment to the process by which crises are identified empirically, 2) the addition of control panels to dampen the prevalence of false positives, 3) the addition of inter-temporal interaction terms that strive to bring the forecasting model in line with contemporary theoretical models of currency crisis, and 4) the addition of an algorithm for controlling post-crisis bias in macroeconomic trends. In out-of-sample, post-estimation analysis, the system is able to identify 75% of crisis incidents while generating false positives at a rate of less than 20%. Currency crisis EWS have challenged economists for some time, and though these results are not directly comparable to current EWS based on differences in reporting strategies, they are strong enough to warrant further investigation, particularly for applicability as policy instruments.
Advisor: Charles Becker, Kent Kimbrough
Forecasting Existing Home Sales using Google Search Engine Queries
By Brian Humphrey
This paper employs OLS regressions to determine whether Google search query data improves national and local existing home sales forecasts. The local dataset features metropolitan statistical area data from Texas. Initially, the national and local regressions are estimated without macroeconomic variables. Macroeconomic variables are subsequently included in order to determine if Google search queries provide information not already present in the macroeconomic variables. The impact of the Google variables is assessed using root mean squared error, p-values, and adjusted r-squared values. Finally, the top models are compared using out-of-sample testing. Both the in-sample and out-of-sample test results suggest that Google search query data improves national and local existing home sales forecasts.
Advisor: James Roberts
Oil Price Shocks and the Monetary Policy
By Ying-te Huang
Essentially all US recessions have been preceded by oil price shocks and subsequently tighter monetary policies. (Bernanke, Gertler and Watson, 1997). Whereas some scholars, including Herrera and Hamilton (2001) claimed that such oil price shocks contributed to the recession that followed, others, including, Bernanke et al. (1997), believed that the Fed‘s endogenous reaction to the monetary policy, rather than oil price per se, led to the contraction of the economy. Which had a greater influence on gross domestic product (GDP) — oil price shocks or a change in monetary policy—has been debated for years. One of the most prominent debates is between Bernanke et al. (1997), and Herrera and Hamilton (2001). In the debate, Bernanke et al. and Herrera and Hamilton used the same model but with different lag lengths and came to different conclusions. In the current study, we contribute to the resolution of this issue by using a new methodology to examine the effects of monetary policy to the economy in response to oil price shocks. Specifically, we determine the contemporaneous causal order empirically in structural vector-autoregression (SVAR). We then examine the economic responses in counterfactual schemes where the Fed does not respond to the oil price shocks. Contrary to Bernanke et al.‘s finding, in which the economy would have done better had the Fed not held its interest rate constant during an oil price shock, we found that the Fed‘s response generates higher output but a less steady price level. This suggests that the results are dependent upon prior assumptions of the model specifications.
Advisor: Kevin Hoover
Movements in the Digital Divide
By Benjamin Berg
I explore how the “Digital Divide” in the United States manifests during the
period from 2000 to 2007. I find that the digital divide is decreasing with home computer
and Internet use. But a new divide has emerged with high-speed Internet. Even though
the income gap is closing with home computer use, the evidence suggests that an
important income bottleneck is occurring at the computer acquisition level. Many never
have the chance to adopt the Internet at home because they do not have a computer.
Advisor: Peter Arcidiacono
A Model of Speculative Attacks and Devaluations in Korea and Indonesia
By Austin Lin
Since the beginning of the Bretton Woods era, currency crises and speculative attacks
have affected the world economy. This paper presents a model, originally derived by
Blanco and Garber, that predicts one-period ahead probabilities of a currency devaluation
and the expected exchange rate conditional on a devaluation. The analysis is then applied
to Korea and Indonesia during the periods of 1960-1980 and 1969-1989, respectively.
Despite numerous devaluations during both periods, all of the calculated probabilities of
devaluation in the next period are close to zero for both Korea and Indonesia. However,
it is promising that rises in predicted probabilities of devaluation are observed before
actual devaluations for Indonesia.
Advisor: Kent Kimbrough
Does the Quality of Public Transit Affect Commuters’ Response to Gasoline Price Changes?
By Allison Smith
The effect of public transportation on commuters’ sensitivity to gas prices is examined using a proxy for the quality of public transportation. This proxy is measured as the difference in the individual’s predicted commute times by private transit and public transit, estimated using the individual’s observable characteristics. The interaction of gasoline price with this measure is found to have a significant effect on annual vehicle miles traveled. Further, there is a strong correlation between the quality of public transit and elasticity of demand. This indicates that public transit could play an important role in increasing the effectiveness of gasoline taxes. This has timely policy implications with the federal allocations for public transit infrastructure in the 2009 stimulus bill.
Advisor: Christopher Timmins
