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Demonetization, the Cash Shortage and the Black Money

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  • Ashok K. Lahiri

Abstract

Demonetisation of INR 500 and INR 1,000 notes in India on November 8, 2016 is different from many other countries’ scrapping of high value notes in two respects – the withdrawal of their legal tender status and continuation with INR 1,000 and INR 2,000 notes. It has resulted in a cash shortage. Non-cash medium of payments may be encouraged by this shortage, but, with supplies only from the domestic currency presses, the shortage is unlikely to disappear by the end of 2016. Import of currency printed abroad may provide a solution for ending it sooner. The impact of the shortage, if it continues, will be fully felt in the last quarter of 2016-17. Its growth impact in 2016-17 is 0.7-1.3 per cent depending on how much shortage continues and for how long. [NIPFP Working Paper No. 184].

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  • Ashok K. Lahiri, 2017. "Demonetization, the Cash Shortage and the Black Money," Working Papers id:11550, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:11550
    Note: Institutional Papers
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    References listed on IDEAS

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    1. International Monetary Fund, 1994. "Cash Shortage in the Former Soviet Union," IMF Working Papers 1994/067, International Monetary Fund.
    2. Boughton, James M & Wicker, Elmus R, 1979. "The Behavior of the Currency-Deposit Ratio during the Great Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(4), pages 405-418, November.
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