Canadian Legalization of Cannabis Reduces Both its Cash Usage and 'Black' Economy

12 Pages Posted: 23 Jan 2019

See all articles by Charles Goodhart

Charles Goodhart

London School of Economics & Political Science (LSE) - Financial Markets Group

Jonathan Ashworth

Independent

Date Written: January 2019

Abstract

The Canadian Government legalized Cannabis usage on October 17th, 2018. During the same month, primarily in the week before and after such legalization, the amount of cash in circulation fell quite materially, in contrast to the rises typically observed in previous years. A key driver is likely to have been Cannabis users switching from cash payments for illegal purchases to using standard recordable electronic payments for their purchases, which have now become legal. The legalization of Cannabis should ultimately reduce the size of the Underground economy by around 4 or 5 percent, with a much bigger decline likely in the black economy.

Keywords: Black Economy, Canada, Cannabis, cash

JEL Classification: D12, E41, K40

Suggested Citation

Goodhart, Charles A.E. and Ashworth, Jonathan, Canadian Legalization of Cannabis Reduces Both its Cash Usage and 'Black' Economy (January 2019). CEPR Discussion Paper No. DP13448. Available at SSRN: https://ssrn.com/abstract=3319762

Charles A.E. Goodhart

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom
0207 955 7555 (Phone)
0207 242 1006 (Fax)

Jonathan Ashworth (Contact Author)

Independent ( email )

No Address Available

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