Publication Type
Working Paper
Version
publishedVersion
Publication Date
7-2020
Abstract
We study how consumer spending responds to digital payments, using the differential switch to digital payments across consumers induced by the sudden 2016 Indian Demonetization for identification. Usage of digital payments rose by 3.38 percentage points and monthly spending increased by 3% for an additional 10 percentage points in prior cash dependence. Spending remained elevated even when cash availability recovered. Robustness analyses show that the spending response is not driven by income shocks, credit supply, price changes, or consumers' moving to the formal market. We provide evidence that digital payments increase consumer spending due to subdued salience.
Keywords
digital payments, financial technology, consumption, India, demonetization
Discipline
Asian Studies | Finance
Research Areas
Applied Microeconomics
First Page
1
Last Page
57
Identifier
10.2139/ssrn.3641508
Publisher
SSRN
Embargo Period
2-10-2022
Citation
AGARWAL, Sumit; GHOSH, Pulak; LI, Jing; and RUAN, Tianyue.
Digital payments and consumption: Evidence from the 2016 demonetization in India. (2020). 1-57.
Available at: https://ink.library.smu.edu.sg/soe_research/2590
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2139/ssrn.3641508