Impact of India's Demonetization on Domestic Agricultural Markets

59 Pages Posted: 8 Nov 2017 Last revised: 2 Mar 2021

See all articles by Nidhi Aggarwal

Nidhi Aggarwal

Indian Institute of Management (IIMU), Udaipur

Sudha Narayanan

Indira Gandhi Institute of Development Research (IGIDR); International Food Policy Research Institute

Date Written: March 1, 2021

Abstract

We examine the impact of an extreme monetary shock, India's demonetization of 2016, on domestic agricultural trade. Using data from around 3000 regulated markets for 35 major crops, we find that trade value fell by 16.3 - 16.8 \% in the short run, settling at 11.8 - 12.1 % after eight months - driven primarily by a decline in prices. Triple difference estimates suggest sharpest impacts for kharif crops, perishables and crops with minimal government intervention. Markets far away from banks and other markets fared worse. Our results suggest that the implosion of value of
agricultural trade domestically persisted well beyond the season that coincided with the shock, whereas existing findings suggest that the negative impact on the economy as a whole dissipates.

Keywords: Demonetization, Agricultural Markets, India, Difference-in-Differences, Shock, Persistence, triple differences

JEL Classification: E50, Q02, Q11, Q13

Suggested Citation

Aggarwal, Nidhi and Narayanan, Sudha, Impact of India's Demonetization on Domestic Agricultural Markets (March 1, 2021). Available at SSRN: https://ssrn.com/abstract=3066042 or http://dx.doi.org/10.2139/ssrn.3066042

Nidhi Aggarwal

Indian Institute of Management (IIMU), Udaipur ( email )

Mohanlal Sukhadia University Campus
Udaipur, Rajasthan 313001
India

Sudha Narayanan (Contact Author)

Indira Gandhi Institute of Development Research (IGIDR) ( email )

Gen A.K. Vaidya Marg Santoshnagar
Goregaon (East)
Mumbai, Maharashtra 400065
India

International Food Policy Research Institute ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

HOME PAGE: http://https://www.ifpri.org/profile/sudha-narayanan

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