Working Paper: CEPR ID: DP13448
Authors: Charles A. Goodhart; Jonathan Ashworth
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.
Keywords: cannabis; canada; cash; black economy
JEL Codes: D12; E41; K40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Legalization of cannabis (K16) | Reduction in cash usage (D16) |
| Reduction in cash usage (D16) | Decrease in the size of the underground economy (E26) |
| Legalization of cannabis (K16) | Decrease in the size of the underground economy (E26) |