Payment System Shocks under Goods and Financial Market Segmentation

Tuesday Seminar
Event Speaker: 
Parag Waknis
Event Time: 
03:30 PM to 05:00 PM
Event Venue: 
HSS Committee Room (MS 610)

Abstract

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.

Bio

Parag Waknis is an Associate Professor of Economics at Ambedkar University Delhi (AUD) specializing in monetary economics and macroeconomics. Before joining AUD, he worked as an Assistant Professor at the University of Massachusetts Dartmouth, USA. He completed his Ph.D. from the University of Connecticut, USA in 2011. His current research projects focus on impact of demonetization on the Indian economy and implications of informal markets for optimal monetary policy. He has published his research in leading international and national journals.