Monetary Theory and Electronic Money

This project assesses a class of models and money and the payments system in the context of mobile banking and electronic money transfer technologies and the lessons that can be learned. In collaboration with Billy Jack of Georgetown University and Tavneet Suri of MIT Sloan, analysis of Safaricom's popular and rapidly-growing M-PESA mobile banking program is conducted. This SMS-based money transfer system allows individuals to deposit, send, and withdraw funds from a virtual account on their cell phones, separate from the banking system. Jack, Suri, and Townsend explore the role of e-money and its impact on monetary and regulatory policy decisions that face the central bank.

Impact of Financial Services in Mexico

This study seeks to evaluate the impact of financial services on Mexican household's welfare. To do so, a series of complementary structural models are proposed to assess the impact on both household decisions and overall economic development. This structural equilibrium approach allows for the understanding of the mechanisms behind several economic and welfare variables. This project uses data from BANSEFI, Mexico's development bank and a provider of savings and other financial instruments.

Aurepalle Village Project

As part of this project, Townsend tests credit and insurance mechanisms in several villages in southern India. The Aurepalle village is characterized by low per capita income and per capita consumption, and the risk to agriculture from erratic monsoon rains is high. Of particular interest are the risk-sharing networks that exist and the more formal insurance mechanisms and how effectively these insure people in the Aurepalle village against rainfall, crop and human diseases, and sever income fluctuations.

Rainfall Insurance in Rural India

Xavier Gine of the World Bank and James Vickery of the Federal Reserve Bank of New York work with Townsend in this project to evaluate rainfall insurance schemes for smallhold farmers in southern India. Typical insurance products have payouts linked to a publicly observable index, such as rainfall recorded on a local rain gauge. This research looks at historical insurance payouts in an effort to better understand the properties of estimated insurance premiums and payouts. It also looks at patterns associated with the take-up of rainfall insurance.