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Demonetisation: Impact on the Economy

Author

Listed:
  • Tax Research Team

    (National Institute of Public Finance and Policy)

Abstract

The argument posited in favour of demonetisation is that the cash that would be extinguished would be black money and hence, should be rightfully extinguished to set right the perverse incentive structure in the economy. While the facts are not available to anybody, it would be foolhardy to argue that this is the only possibility. Therefore, it is imperative to evaluate the short run and medium-term impacts that such a shock is expected to have on the economy. Further, the impact of such a move would vary depending on the extent to which the government decides to remonetise. This paper elucidates the impact of such a move on the availability of credit, spending, level of activity and government finances.

Suggested Citation

  • Tax Research Team, 2016. "Demonetisation: Impact on the Economy," Working Papers 16/182, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:16/182
    Note: Working Paper 182, 2016
    as

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    File URL: http://www.nipfp.org.in/media/medialibrary/2016/11/WP_2016_182.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    demonetization ; cashless transactions ; credit ; tax evasion;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue

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