چکیده:
emonetization initiative by Govt. of India in Nov-Dec, 2016 aimed at addressing the issues like black money, hoarding and overall cleansing the monetary system. This paper in this regard attempts to empirically examine the impact of demonetization drive upon the monetary system by taking data of 180 days prior to Nov, 2016. The cointegration results exhibit show a long run cointegration between the money supply, demonetization dummy, cash in hand, notes in circulation and bank deposits. Furthermore, our Bayer-Hanck cointegration also confirms the cointegration among the variables. Our error correction mechanism analysis shows the long run relation between the variables. The variance decomposition analysis further states that effect of demonetization is widely visible upon the cash in hand followed by the notes in circulation. Despite the wider claims by the government regarding the positive impacts of demonetization drive, this initiative is fraught with several challenges and limitations. The implications of this initiative are discussed in this paper.
خلاصه ماشینی:
Thecointegration results exhibit show a long run cointegration between the money supply, demonetization dummy, cash in hand, notes in circulation and bank deposits.
We also analyze the trends of money supply (M1), notes in circulation and cash in hands with bank after the introduction of demonetization.
Table 1: Specific Recent Review of Literature on Demonetization Author Context Subject Result Marin (2002) Russia Demonetization in former soviet union No impacts in pricing behavior of non-cash transcation across sectors Jing (2007) China Dynamics of gold demonetization Gold as a currency weakens after demonetization and better starategy by people is to keep gold with them 1069 Mali (2016) India Impact of demonetization across sectors Mixed impact across sectors and is expected to give positive impact in controlling black money in long run Pachare (2016) India Demonetization and digital payment system Demonetization post Nov 2016 has led to the e- wallet system Raychadhuri (2017) India Demonetization- unsolved economic puzzles Mixed impacts upon the economy with surprise elements for people and aim for erasing black money Notes: Author’s own compilation 3.
1 Impact on Money Supply Demonetization has significantly reduced the circulation of cash in the economy as the old currency notes are no more a part of the legal tender.
6. Data and Empirical Methodology The foremost motivation behind this study is to empirically find out the effect of demonetization on the Indian economy specifically on Money Supply (M1), Notes in Circulation (NC), Deposit Money of the Public (DMP) and Cash on Hand with Banks (CHB).