Malte Krueger

Towards a Moneyless World

The New Monetary Economics predicts that a low-transaction-cost world will be characterised by monetary separation. Current innovations in the payment system seem to bring us closer to such a moneyless world. However, market microstructure theory suggests that transaction costs will not fall to zero. Therefore, a common medium of exchange that serves as unit of account will remain a necessary instrument to reduce transaction costs. While emoney has the potential to replace cash it will be denominated in units of national currencies. Therefore, central banks will remain in control, even if emoney is issued off-shore.

Dynamic Hedging in Currency Crisis

Garber and Spencer have argued that dynamic hedging may lead to perverse results when interest rates are used to defend an exchange rate. This paper shows that interest rate changes have little effects on dynamic hedgers when volatility is high.

Internet Payments in Germany

Ten years ago, internet payments seemed to be a new and quickly expanding universe, ready to be taken over by new and fanciful payment methods. New companies were taking if not the market so at least the headlines by storm. The year 1994 saw the foundation of new upstarts such as DigiCash, CyberCash and First Virtual, and 1994 also was the birth year of SSL (the current standard of encoding confidential information sent over the internet).

Pros and Cons of Cash: The State of the Debate

Abstract This study investigates the benefits and disadvantages of cash in a general context. First, we explicitly address the arguments of cash critics, who are calling for cash to be abolished altogether. Second, we show that cash plays a crucial role in the current two-tier banking system. Third, we are discussing selected benefits of cash, inter alia its use in financial crises and the provision of privacy. We conclude that the abolition of cash would have major drawbacks and could entail undesirable and unintended consequences. Vor- und Nachteile des Bargeldes: Eine Bestandsaufnahme Zusammenfassung In der vorliegenden Untersuchung werden einige der wichtigsten Vor- und Nachteile von Bargeld analysiert. Erstens werden die Argumente der Bargeldkritiker, die Bargeld abschaffen wollen, eingehend erortert. Zweitens wird gezeigt, welche fundamental wichtige Rolle Bargeld in einem zweistufigen Bankensystem spielt. Drittens werden einige ausgewahlte Vorteile des Bargelds untersucht, insbesondere die Bedeutun...

The introduction of cashless wage payments and the spread of branch banking in post-war Germany

The period from the 1950s to the late 1970s saw an almost uniform decline of cash-to-GDP ratios in industrial countries. A closer look at the German payment system suggests that the factor causing such a change was a shift towards cashless wage payments. In this period, in Germany, the branch network of banks expanded significantly and at the end of the period almost all economically active individuals had a current account. This change was triggered by rising wages and income. Rising wages increased the burden of weekly wage payments in cash, and rising income made the average earner more attractive for banks. Moreover, regulation and deregulation, by triggering both price and non-price competition, may also have played a role. Technological change was not an independent driver. In the 1950s, the number of giro accounts per German adult was comparable to the current situation in many developing countries. Yet, I argue that the German post-war experience does not provide a blueprint for most of these countries.

Mobile Payments: The Second Wave

When addressing the issue of m-payments, it is difficult to come up with a proper definition. The term remains as opaque as ever. As a consequence, “m-payments” refers to very different types of payments that only have in common that the mobile phone is used somewhere in the payment process. The mobile phone is used as: a plastic body, an identifier (using the SIM), a communication channel, a computer and a payment terminal. Mobile phones are used for payments in the mobile Internet, they are used for proximity payments at the POS and they are used for P2P payments.

Exchange Rate Effects of Portfolio Shifts

Using the Branson model as an example, this paper seeks to clarify the role of interest rate and exchange rate changes in asset market models. Focusing on short-term adjustments, it is shown that portfolio shifts mainly affect relative interest rates in different countries. Only to the extent that portfolio shifts lead to changes in the money demand or money supply, are exchange rates affected as well. The announcement of German monetary union in 1990 is used as an example to illustrate the relative significance of interest rate changes as shock absorbers.