Economics at your fingertips  

Consumer Payment Choice and the Heterogeneous Impact of India’s Demonetization

Ayushi Bajaj and Nikhil Damodaran

No 07-20, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: Consumer payment choice is based on heterogeneous preferences, availability, usage costs, and effective taxes. We examine the consequences of this choice on consump-tion distribution, aggregate output, welfare and the shadow economy. We employ this framework to analyze India’s unexpected demonetization of 86% of its currency in circulation. We find that this shock to liquidity led to an immediate and temporary fall in aggregate output and welfare. Further, it led to disparate distributional effects as not all consumers could switch to non-cash payments. Using consumption distribu-tion data, we find the lower and middle deciles in rural areas were disproportionately affected.

JEL-codes: D83 E41 E52 E58 O17 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2020-12
New Economics Papers: this item is included in nep-mac, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) ... tionedited-final.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This working paper can be ordered from ... eco/research/papers/

Access Statistics for this paper

More papers in Monash Economics Working Papers from Monash University, Department of Economics Department of Economics, Monash University, Victoria 3800, Australia. Contact information at EDIRC.
Bibliographic data for series maintained by Simon Angus ().

Page updated 2021-07-16
Handle: RePEc:mos:moswps:2020-07