Demonetization on Five Continents..

Prof Jeffry Frankel says demonetisation is the new trend in world economics.

Around the world, several countries are currently undergoing “demonetization,” or currency reforms in which the government removes banknotes of a certain denomination from circulation and replaces them with new notes. Governments pursue demonetization for a variety of reasons, and some of the recent initiatives are going better than others.

He says there are three kinds of demons:

  1. To tackle hyperinflation like in Venezuela
  2. To decommission and replace bills for more benign, technical reasons, such as to remove unpopular notes; introduce new counterfeit-proof bills; switch national currencies (like Euro).
  3. To crack down on illegal activities as India did.

The experience of India shows that too much boldness also backfires:

Western leaders could probably be bolder when they phase out big bills as slowly as they do. But Modi has been too bold.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: