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Pre and Post Impact of Demonetization on Economic Growth:Evidence from Countries Implemented Demonetization


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1 IPS Academy, Institute of Business Management and Research, Indore, India
     

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Demonetization is the process by which government of any country cancel the legal tender of currency unit. Demonetization is necessary whenever there is a parallel economy run by black money. The old unit of currency must be retired and replaced with a new currency unit. This measure has been taken by the country to address the issue of corruption, black money and counterfeit notes. Demonetization move is expected to cleanse the formal economic system and discard black money from the economy. On 8 November 2016, the Government of India announced the demonetization of all 500 and 1,000 banknotes of the Mahatma Gandhi Series on the recommendation of the Reserve Bank of India (RBI). The government claimed that the demonetization would restrict the shadow economy and crack down on the use of illegal and counterfeit cash to fund illegal activity and terrorism. The announcement of demonetization and the prolonged cash shortages created significant commotion throughout the economy, intimidating economic output. The move was seriously criticized as inadequately designed and inequitable, and was met with protests, litigation, and strikes. This paper elucidates the Pre & Post impact of demonetization on economic growth. The study covers a pre and post period of demonetization of selected countries (Australia, Ghana, Myanmar and Nigeria). The study is based on changes in Gross domestic product (GDP) of selected countries during pre and post demonetization.

Keywords

Demonetization, Economic Growth, Cashless Economy, Black Money, Indian Rupee.
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  • Pre and Post Impact of Demonetization on Economic Growth:Evidence from Countries Implemented Demonetization

Abstract Views: 409  |  PDF Views: 1

Authors

Kali Charan Modak
IPS Academy, Institute of Business Management and Research, Indore, India
Vivek S. Kushwaha
IPS Academy, Institute of Business Management and Research, Indore, India

Abstract


Demonetization is the process by which government of any country cancel the legal tender of currency unit. Demonetization is necessary whenever there is a parallel economy run by black money. The old unit of currency must be retired and replaced with a new currency unit. This measure has been taken by the country to address the issue of corruption, black money and counterfeit notes. Demonetization move is expected to cleanse the formal economic system and discard black money from the economy. On 8 November 2016, the Government of India announced the demonetization of all 500 and 1,000 banknotes of the Mahatma Gandhi Series on the recommendation of the Reserve Bank of India (RBI). The government claimed that the demonetization would restrict the shadow economy and crack down on the use of illegal and counterfeit cash to fund illegal activity and terrorism. The announcement of demonetization and the prolonged cash shortages created significant commotion throughout the economy, intimidating economic output. The move was seriously criticized as inadequately designed and inequitable, and was met with protests, litigation, and strikes. This paper elucidates the Pre & Post impact of demonetization on economic growth. The study covers a pre and post period of demonetization of selected countries (Australia, Ghana, Myanmar and Nigeria). The study is based on changes in Gross domestic product (GDP) of selected countries during pre and post demonetization.

Keywords


Demonetization, Economic Growth, Cashless Economy, Black Money, Indian Rupee.

References