Centre for Development Economics
Department of Economics, Delhi School of Economics


Payment system shocks under Goods and Financial Market Segmentation


Parag Waknis
Ambedkar University, Delhi

30th Aug 2018 (Thursday) at 3:00 PM

Venue: Seminar Room (First Floor)
Department of Economics, Delhi School of Economics

All are cordially invited

A surprise demonetization, where certain or all denominations of currency notes cease to be legal tender within a short notice, can be understood as a severe payment system shock requiring agents to immediately shift to alternative payment mechanisms. I use a short-term macroeconomic model featuring goods and financial market segmentation to analyze the effects of such a shock in an economy with substantial informality and cash dependence. I provide a quantitative characterization of the equilibrium dynamics using a deterministic and a stochastic process that mimics the recent demonetization and remonetization exercise in India.

back to seminars...