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The Great Indian Demonetization

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  • Amartya Lahiri

Abstract

On November 8, 2016, India demonetized 86 percent of its currency in circulation. The stated objectives of the move were to seize undeclared income, to destroy counterfeit currency, to speed up formalization of the economy, and to increase the tax base. I find that the evidence over the subsequent three years suggests that the move had limited success in achieving its stated objectives. Disaggregated data suggests that demonetization did have appreciable costs in terms of lost jobs and output. However, the output costs appear to have been temporary.

Suggested Citation

  • Amartya Lahiri, 2020. "The Great Indian Demonetization," Journal of Economic Perspectives, American Economic Association, vol. 34(1), pages 55-74, Winter.
    • Handle: RePEc:aea:jecper:v:34:y:2020:i:1:p:55-74
    DOI: 10.1257/jep.34.1.55
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    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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