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Demonetization: When 86% of India's Currency Disappeared

Graham Watson

28th August 2020

This is a fantastic clip looking at the implications of India's 2016 demonetisation.

The Indian government announced that all bank notes above 500 rupees were no longer valid currency for purchasing goods and services, but could be deposited at banks, provided that its owners could prove its provenance wasn't illegal.

As a result, economists looked at the effects of this - not via conventional data, but in looking at employment figures and night light data. Both revealed that in the areas with the sharpest monetary contractions, the level of economic activity fell by 3%.

As a result, it might help highlight some of the risks of leaving the Euro, for example, which would in effect see temporary demonetisation in a country.

Demonetization: When 86% of India's Currency Disappeared

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to Tutor2U, reads voraciously and is interested in all aspects of Teaching and Learning.

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