1/ In the latest issue of the Journal of Economic Perspectives, @AmartyaLahiri has one of the most comprehensive assessments of #demonetization I have seen to date. The piece is ungated and can be found here: pubs.aeaweb.org/doi/pdfplus/10… 
2/ The bulk of the piece focuses on whether demonetization achieved its three stated goals:
1) Seizing the black wealth created through undeclared income
2) Increasing the tax base
3) digitizing the economy & reducing the reliance on cash
Lahiri analyzes all three.
1) Seizing the black wealth created through undeclared income
2) Increasing the tax base
3) digitizing the economy & reducing the reliance on cash
Lahiri analyzes all three.
3/ Because 99% of the currency was returned, we know that the direct method of capturing unaccounted wealth did not work. When it comes to indirect methods (tax), neither demonetization nor GST pushed the indirect tax/GDP ratio off its recent trend path.
4/ When it comes to the number of tax filers, there is no sharp increase in 2017. There was, however, a sharp increase in 2018, which is likely due to GST and *possibly* a delayed/lagged response to demonetization
5/ When it comes to digitization, the volume of digital transactions has risen substantially. But demonetization does not appear to have affected the trends or levels of either digital or traditional transactions (in fact, same is true for GST) in value terms.
6/ Then, there are the costs of demonetization. None of the interest rates showed any sharp movement off their long-run trends around demonetization, nor did bank credit pick up significantly. Latter is surprising given that bank deposits rose substantially.
7/ On jobs: the unemployment rate (using CMIE data) was declining throughout 2016--even after demonetization. But it begins to rise steeply after the introduction of GST. Other work by CMIE suggests a sharp decline in the labor force (especially in the demonetization quarter).
8/ Finally, on GDP growth: research by Chodorow-Reich et al. (2018) finds a sharp 2% growth shock that is transitory and rebounds quickly. Work by Karmakar & Narayanan (2019) finds that households without bank accounts suffered a temporary consumption shock.
9/ What does Lahiri conclude? Growth in digitized payments, in the tax base & tax revenues suggests demonetization did little to affect pre-demonetization trends. On the cost side, demonetization likely (temporarily) reduced output & employment, especially in the informal sector.
10/ Overall, Lahiri concludes: "Demonetization appears to have failed the cost-benefit analysis of public policy initiatives: it had little success in achieving its stated goals while having imposed significant costs on the public."
11/ Anyway, I learned a lot from this paper. Kudos to @AmartyaLahiri for this public service and apologies to him if I mischaracterized any of his findings. Go read the paper--it's free and ungated here: pubs.aeaweb.org/doi/pdfplus/10…
