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<p>On November 8, 2016, the Indian policymakers decided to demonetize high-value currency. Recent studies have shown that a cash crunch has a significant adverse impact on the economy. This paper examines how India’s demonetization of higher currency notes has affected the tourism industry. It utilizes monthly foreign tourist arrivals in India from January 2006 to April 2018 and tests the structural breaks during the demonetization period. Furthermore, incorporating the breaks, this paper also estimates several alternative models of tourism demand. A range of estimators is employed for this purpose in a cointegrating framework. The results surprisingly suggest that demonetization boosted India’s international tourist arrivals. The effect is positive, perhaps due to promoting digital money, reducing corruption, and making transactions safer for international travellers. Greater and rule-based use of digital and plastic money, especially by tourism service providers in the unorganized sector, seems to be a good step towards building a cleaner and safer India for foreign travellers.</p>

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Cash and International Tourism: Evidence from India’s Demonetization

  • 期刊论文

  • 发表日期：

    2026年3月4日

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  • Chandan Sharma,
  • Debdatta Pal

摘要

On November 8, 2016, the Indian policymakers decided to demonetize high-value currency. Recent studies have shown that a cash crunch has a significant adverse impact on the economy. This paper examines how India’s demonetization of higher currency notes has affected the tourism industry. It utilizes monthly foreign tourist arrivals in India from January 2006 to April 2018 and tests the structural breaks during the demonetization period. Furthermore, incorporating the breaks, this paper also estimates several alternative models of tourism demand. A range of estimators is employed for this purpose in a cointegrating framework. The results surprisingly suggest that demonetization boosted India’s international tourist arrivals. The effect is positive, perhaps due to promoting digital money, reducing corruption, and making transactions safer for international travellers. Greater and rule-based use of digital and plastic money, especially by tourism service providers in the unorganized sector, seems to be a good step towards building a cleaner and safer India for foreign travellers.