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Canadian Legalization of Cannabis reduces both its cash usage and ‘Black’ Economy

Author

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  • Goodhart, Charles
  • Ashworth, Jonathan

Abstract

The Canadian Government legalized Cannabis usage on October 17th, 2018. During the same month, primarily in the week before and after such legalization, the amount of cash in circulation fell quite materially, in contrast to the rises typically observed in previous years. A key driver is likely to have been Cannabis users switching from cash payments for illegal purchases to using standard recordable electronic payments for their purchases, which have now become legal. The legalization of Cannabis should ultimately reduce the size of the Underground economy by around 4 or 5 percent, with a much bigger decline likely in the black economy.

Suggested Citation

  • Goodhart, Charles & Ashworth, Jonathan, 2019. "Canadian Legalization of Cannabis reduces both its cash usage and ‘Black’ Economy," CEPR Discussion Papers 13448, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13448
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    Citations

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    Cited by:

    1. Walter Engert & Ben Fung & Jozsef Molnar & Gradon Nicholls, 2019. "Explaining Unusual Cash Patterns in 2018," Staff Analytical Notes 2019-22, Bank of Canada.
    2. Auriol, Emmanuelle & Mesnard, Alice & Perrault, Tiffanie, 2023. "Weeding out the dealers? The economics of cannabis legalization," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 62-101.
    3. Auriol, Emmanuelle & Mesnard, Alice & Perrault, Tiffanie, 2019. "Defeating Crime? An Economic Analysis of Cannabis Legalization Policies," CEPR Discussion Papers 13814, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Cannabis; Canada; Cash; Black economy;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General

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