Who Gained from India’s Demonetization? Insights from Satellites and Surveys
Areendam Chanda and
Justin Cook ()
MPRA Paper from University Library of Munich, Germany
On November 8, 2016, the Indian government abruptly demonetized 86% of its currency in circulation in an attempt to reduce black money, corruption, and counterfeiting. Yet, 99% of the currency was eventually returned to banks. We exploit large regional variations in deposit growth as a result of demonetization to study the medium-term effects of this policy. Using night-light data, we show that districts which experienced higher deposit growth during the demonetization period recorded higher levels of economic activity in the year and a half that followed. We estimate a one standard deviation increase in deposits is associated with a 5% increase in district GDP per capita. Further, districts with larger rural population, agricultural and non-agricultural informal labor shares also recorded an increase in nighttime light activity. The results are also supported by household-level surveys on income and expenditures.
Keywords: Demonetization; Regional Economic Growth; Monetary Policy; Indian Economy; Difference in Difference; Informal Economy; Agriculture; Credit (search for similar items in EconPapers)
JEL-codes: E21 E26 E51 E65 O11 O13 O16 O17 O18 O5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-gro, nep-iue, nep-mac, nep-mon and nep-pay
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Working Paper: Who Gained from India's Demonetization? Insights from Satellites and Surveys (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:95762
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