Impact of India's Demonetization on Domestic Agricultural Markets
59 Pages Posted: 8 Nov 2017 Last revised: 2 Mar 2021
Date Written: March 1, 2021
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
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