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Canadian legalization of cannabis reduces both its cash usage and 'black' economy

Ashworth, Jonathan and Goodhart, C. A. E. (2019) Canadian legalization of cannabis reduces both its cash usage and 'black' economy. CEPR Discussion Paper (13448). Centre for Economic Policy Research, London, UK.

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Abstract

The Canadian Government legalized Cannabis usage on October 17th, 2018. During the same month, primarily in the week before and after such legalization, the amount of cash in circulation fell quite materially, in contrast to the rises typically observed in previous years. A key driver is likely to have been Cannabis users switching from cash payments for illegal purchases to using standard recordable electronic payments for their purchases, which have now become legal. The legalization of Cannabis should ultimately reduce the size of the Underground economy by around 4 or 5 percent, with a much bigger decline likely in the black economy.

Item Type: Monograph (Discussion Paper)
Additional Information: © 2018 CEPR
Divisions: Financial Markets Group
Subjects: H Social Sciences > HB Economic Theory
JEL classification: D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money
K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K40 - General
Date Deposited: 01 Feb 2019 12:39
Last Modified: 01 Apr 2020 23:29
URI: http://eprints.lse.ac.uk/id/eprint/100018

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