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Demonetisation: Some Theoretical Perspectives

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  • Waknis, Parag

Abstract

On November 8, 2017, the Prime Minister of India Narendra Modi declared currency denominations of Rs.500 and Rs.1000 to be illegal for use in transactions. These currency denominations together constituted almost 85% of total currency in circulation according to some estimates. Based on essentiality of money, and a segmented markets model perspective, I analyze the effects of this surprise demonetisation policy on the Indian economy.

Suggested Citation

  • Waknis, Parag, 2017. "Demonetisation: Some Theoretical Perspectives," MPRA Paper 76391, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:76391
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    References listed on IDEAS

    as
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    4. Rafael La Porta & Andrei Shleifer, 2008. "The Unofficial Economy and Economic Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 275-363.
    5. repec:hrv:faseco:33078210 is not listed on IDEAS
    6. Rotemberg, Julio J, 1984. "A Monetary Equilibrium Model with Transactions Costs," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 40-58, February.
    7. Grossman, Sanford & Weiss, Laurence, 1983. "A Transactions-Based Model of the Monetary Transmission Mechanism," American Economic Review, American Economic Association, vol. 73(5), pages 871-880, December.
    8. Carpenter, Seth & Demiralp, Selva, 2012. "Money, reserves, and the transmission of monetary policy: Does the money multiplier exist?," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 59-75.
    9. Lucas, Robert Jr., 1990. "Liquidity and interest rates," Journal of Economic Theory, Elsevier, vol. 50(2), pages 237-264, April.
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    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Demonetisation and the recent GDP growth estimate
      by paragwaknis in Musings of the Sorts on 2017-03-03 02:14:28

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    More about this item

    Keywords

    demonetisation; essentiality of money; segmented markets; informal economy.;
    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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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