India driven out 86% of its currency notes from circulation, in form of high denomination currency-notes from Nov 8, 2016 but failed to inject the equivalent value volume of currency-money in to circulation that created hardships in transactions but their is no sigh of any decline in general price level in the Indian economy so for. In the context of Fisherian and Keynesian monetary theories, what would be the impact of demonetisation-measure on Indian economy in both short-run and long-run? Please share your ideas in form of contribution to theory on money and price in general.
Dr. Dr. Arjun Yallappa Pangannavar: From the LA perpspective, the change in denomination is a neutral procedure only as a way to monetise after an iflation stabilization. Given the composition of the demand for currency (low denominations), any attemp to go against the demand for these "moneys" may create hardships in transactions. The role of central bank's operations is to follow the real demand for "moneys" as well as the real aggregate demand for money, alltogether (given a somehow precise forecast of the price level).
Thank you Carlos R for sharing your thoughts of the issue.
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