ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Black Economy and Demonetisation

In response to the macromodel in “Theoretical Analysis of ‘Demonetisation’” (EPW, 17 December 2016), this article looks at some fundamentals of macroeconomics—consumption function, money demand function, investment behaviour, and money supply—taking the black economy into consideration.

Dipankar Dasguptas Theoretical Analysis of Demonetisation (EPW, 17 December 2016) makes an attempt to explain the macroeconomic impact of demonetisation on key macroeconomic variables, particularly interest rate, along with other variables such as output, inflation, and exchange rate in the emerging context in India. Rightly, the author admits that the study of the long-term consequences of demonetisation would require elaborate and rigorous investigation at the both levels, theoretical, as well as empirical.

In this short response, I would like to draw attention to the fundamentals of macroeconomic model buildingconsumption function and money demand functionalong with brief remarks on investment behaviour and money supply in the presence of black economy with reference to the macromodel suggested by Dasgupta.

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Published On : 20th Jan, 2024

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