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Ebook Must-Take Cards: Merchant Discounts and Avoided Costs

Submitted by wulan on Thu, 09/17/2009 - 07:31

In payment cards systems such as Visa or MasterCard, the interchange fee (IF) paid by the merchant’s bank (the “acquirer”) to the cardholder’s bank (the “issuer”) allocates the total cost of the payment service between the two users, cardholder and merchant. In several regions of the world, competition authorities, banking regulators, and courts of justice have recently considered, or even implemented, regulatory caps on interchange fees that are based on issuers’ costs. The premise for these regulatory caps is that unregulated IFs are set at unacceptably high levels. Merchants, the argument goes, accept to pay the resulting high merchant discount because they are concerned that turning down cards would impair their ability to attract customers; that is, cards are “must-take cards” (Vickers 2005).

However, there is no logical connection between this “must-take cards” argument and the issuers’ cost benchmark used by regulators. The main objectives of this paper are to analyze the validity of the argument and to derive policy implications for possible regulatory intervention. To this purpose, the paper develops a model of the payment card industry that is sufficiently rich to account for the complex effects of IFs on volumes of card payments, banks’ profits, consumer welfare, and retail profits and prices, yet simple enough to assess their regulation.

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Ebook Financial Development and Economic Growth in Turkey: Further Evidence on the Causality Issue

Submitted by puput on Mon, 04/12/2010 - 02:13

This paper explores the relationship between financial development and economic growth in Turkey. Since the seminal work of Patrick (1966), which first postulated a bi-directional relationship between financial development and economic growth a large empirical literature has emerged testing this hypothesis (see Levine, 1997 for survey). Two trends in this literature can, however, be identified. The first, testing the relationship between economic growth and financial development, frequently adopts a single measure of financial development and tests the hypothesis on a number of countries using either cross section or panel data techniques. (See, for example, Jung (1986), Rubini and Sala-i-Martin (1992), Demetriades and Hussein (1996) and Luintel and Khan (1999)).

The second trend in the empirical literature is to examine the hypothesis for a particular country using time series techniques, as for example, Murinde and Eng, (1996) for Singapore, Lyons and Murinde (1994) for Ghana, Odedokun (1989) for Nigeria, Agung and Ford (1998) for Indonesia and Wood (1998) for Barbados. This paper contributes to this second strand of the literature, which it extends in two directions.

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Ebook Air Transport Policies and Frequent Flyer Programmes in the European Community - a Scandinavian Perspective

Submitted by wulan on Fri, 10/09/2009 - 08:52

Travel and tourism are becoming steadily more important in the European Community. The European Community is estimated to be the largest travel and tourism region in the world. Even though the mega-market of North America and the European Community will fall just under the world growth average of 48.8 per cent between 1996 and 2006, the third largest region in terms of travel and tourism employment is the European Community and North America with 19.8 million and 18.1 million jobs, respectively. The European Community is the largest producer of travel and tourism gross output in the world with $1,154 billion expected from 1996. This represents 32.3 per cent of world travel and tourism output. Over the past few decades, as per capita income has risen and families and individuals have gained more holiday and vacation time, travel and tourism have become major elements in the typical household budget worldwide.

The largest concentration of consumer spending on travel and tourism is centred in the industrialized regions of the European Community, North America and Northeast Asia with $639 billion, $622 billion and $452 billion, respectively, estimated for 1996. Consumer demand for travel and tourism services in 1996 is expected to be particularly high in the European Community in which travel and tourism are expected to account for 13.4 per cent of consumer budgets. The European Community is the region with the largest government funding for travel and tourism with estimated 1996 expenditures of $120 billion.

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