Journal of Financial Market Infrastructures
Editor-in-chief: Ron Berndsen
Volume 9, Number 2 (December 2020) - published July 2021
Jorge Cruz Lopez
University of Western Ontario and Financial Network Analytics
De Nederlandsche Bank
Serafin Martinez Jaramillo
CEMLA and Banco de México
This edition of the Journal of Financial Market Infrastructures presents the second volume of the Special Issue on Big Data and Data Science in FMIs. Our letter introducing the first volume can be found here.
Our call for papers had a positive reception and, given the number of high-quality submissions we received, we considered it appropriate to release a second special issue. In this instance, we present three articles that adopt innovative techniques to analyze payment systems, money market transactions and financial inclusion. Together, these papers highlight the central role that FMIs play in the economy, and they illustrate how data science can help us improve their management.
In our first paper, “Measure twice before you cut: differences in Furfine-type algorithm implementations”, Alexander M¨uller and Jan Paulick use TARGET2 data to compare two methodologies that are commonly used to identify money market loans in payments data. Based on their results, Müeller and Paulick propose a set of guidelines to improve the design of Furfine-type algorithms that take into account the monetary policy environment and other market conditions. The paper provides an important contribution to the literature. Granular data on money market transactions is not always available or easily obtainable, so accurate identification of these transactions in payments data is often needed to evaluate funding relationships and monetary policy.
Continuing in the area of money markets, “The trade-off between liquidity risk and counterparty risk in money market networks” by Carlos León and Miguel Sarmiento examines how liquidity is exchanged in secured, unsecured and central bank repurchase networks. Using Colombian data, the authors show that money market networks have different levels of centralization and imply different trade-offs between liquidity and counterparty risks. Their model illustrates the important role that central banks play in mitigating liquidity risks and highlights the relationship between the structure of money markets and financial stability.
The third paper in this issue, ‘Retail payments and financial inclusion in Latin America and the Caribbean: identifying gaps and opportunities” by Raúl Morales-Resendiz, Milton Vega, José Aurazo and Anahĺ Rodriguez, shows the important role that central banks and digital payments play in fostering financial inclusion. Using self-assessments from nine central banks in Latin America and the Caribbean, the authors evaluate the implementation of the payment aspects of financial inclusion (PAFI) framework established by the Committee on Payments and Market Infrastructures and the World Bank. Their analysis uncovers a set of factors that increase the probability of successfully implementing the PAFI framework. This important finding allows the authors to propose policy guidelines for the successful implementation of financial inclusion policies.
The authors represented in this issue have done an excellent job at presenting their findings and offering practical policy recommendations. We believe that practitioners, academics and regulators will benefit greatly from the insights provided in the included articles. We also hope that this special issue inspires future research on FMIs.
Finally, we would like to sincerely thank all of the authors who responded to our call for papers and the referees who assisted us with the editorial process. We would also like to extend our gratitude to Ron Bernsdsen, Editor-in-Chief, and Jade Mitchell, Journal Manager, for their support. Without their guidance and encouragement, we would have not been able to release this second special issue.
Papers in this issue
Retail payments and financial inclusion in Latin America and the Caribbean: identifying gaps and opportunities
The payment aspects of financial inclusion (PAFI) framework, set up by the Committee on Payments and Market Infrastructures and the World Bank in 2016, recommends a set of actions to spur financial inclusion by means of improvements in the retail payment…
Measure twice before you cut: differences in Furfine-type algorithm implementations
This study focuses on the practical implementation aspects of “Furfine-type” algorithms used to identify money market loans from payments data.
The trade-off between liquidity risk and counterparty risk in money market networks
The authors examine how liquidity is exchanged in different types of Colombian money market networks (ie, secured, unsecured and the central bank’s repurchase networks) as registered in the local financial market infrastructure.