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The great exchange: Rapid demonetization in Trinidad and Tobago

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  • Hilaire, Alvin
  • Mahabir, Reshma

Abstract

Trinidad and Tobago executed a surprise demonetization of its largest currency note in December 2019 to address financial crimes. This evaluation of the outcome finds that the exercise was relatively well managed by the authorities within the short time frame established, facilitated by good coordination amongst the banks and widespread public communication. There were some avenues for leakages and sidestepping of the restrictions on conversions, including via an initially unplanned concession allowing low-value exchanges at the Central Bank for all individuals after the banknote was no longer legal tender. Nonetheless, there appears to have been an impact on “black money”, with over 5 per cent of the demonetized notes not being presented for exchange. The early evidence suggests that the exercise affected the demand for cash for transactions and savings, but not digitization. It also contributed valuable information for the detection of tax evasion and money laundering.

Suggested Citation

  • Hilaire, Alvin & Mahabir, Reshma, 2020. "The great exchange: Rapid demonetization in Trinidad and Tobago," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 1(1).
    • Handle: RePEc:eee:lajcba:v:1:y:2020:i:1:s2666143820300193
    DOI: 10.1016/j.latcb.2020.100019
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    References listed on IDEAS

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    1. Reserve Bank of India RBI, 2017. "Macroeconomic Impact of Demonetisation-A Preliminary Assessment," Working Papers id:11657, eSocialSciences.
    2. Gabriel Chodorow-Reich & Gita Gopinath & Prachi Mishra & Abhinav Narayanan, 2020. "Cash and the Economy: Evidence from India’s Demonetization," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(1), pages 57-103.
    3. Reserve Bank of India RBI, 2017. "Macroeconomic Impact of Demonetisation: A Preliminary Assessment," Working Papers id:11665, eSocialSciences.
    4. Mr. Tanai Khiaonarong & David Humphrey, 2019. "Cash Use Across Countries and the Demand for Central Bank Digital Currency," IMF Working Papers 2019/046, International Monetary Fund.
    5. Amartya Lahiri, 2020. "The Great Indian Demonetization," Journal of Economic Perspectives, American Economic Association, vol. 34(1), pages 55-74, Winter.
    6. Alain Maurin & Sandra Sookram & Patrick Kent Watson, 2006. "Measuring the size of the hidden economy in Trinidad & Tobago, 1973-1999," International Economic Journal, Taylor & Francis Journals, vol. 20(3), pages 321-341.
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    More about this item

    Keywords

    Demonetization; Trinidad and Tobago; Black Money; Digitization;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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