Liquidity Shocks and Firm Exports: Evidence from Cash Shortages During India’s Demonetization
This paper examines how liquidity shocks caused by currency shortages impact exports. We explore this in the context of India’s 2016 currency demonetization, a sudden government policy announcement that led to 86% of the country’s currency in circulation being rendered illegal within hours. Our analysis uses novel data, including high-frequency customs transaction records matched with exporting firms and their balance sheets, as well as with inter-district domestic trade. While the cash shortages do not directly affect exporting firms, we find a significant and immediate decline in real exports for firms whose domestic customers experience liquidity shocks.
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Copy CitationRitam Chaurey, Ryan Kim, and Pravin Krishna, "Liquidity Shocks and Firm Exports: Evidence from Cash Shortages During India’s Demonetization," NBER Working Paper 33142 (2024), https://doi.org/10.3386/w33142.
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