The Impact of Demonetization on Domestic Agricultural Trade in India

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Date(s) - 11/02/2020
3:00 pm - 4:30 pm

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Abstract:
This paper examines the impact of an extreme monetary shock, India’s demonetization event in 2016, on domestic agricultural trade. Using data on arrivals and prices from around 3000 regulated markets for 35 major crops, we find that demonetization reduced trade value by 13% in the short run, settling at 10% eight months after demonetization – driven more by a decline in prices than of arrivals. Triple difference estimates suggest that the impacts are sharpest for kharif /monsoon crops, perishables and crops where government intervention is minimal or absent; markets in areas with limited bank and market access fared worse. Our results suggest that demonetization left a lasting implosion of agricultural trade domestically.

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