Redenomination

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Redenomination is the process of changing the face value of banknotes or coins used in circulating currency.

When redenomination occurs, financial data that spans the change must be correctly accounted for. For example, the GDP reported by the Central Bank of Nicaragua[dead link] is properly documented.

Inflationary[edit]

In times of inflation, the same number of monetary units have continually decreasing purchasing power. In other words, prices of products and services must be expressed in higher numbers. If these numbers become excessively large, they can impede daily transactions because of the risk and inconvenience of carrying stacks of bills, or the strain on systems, e.g. automatic teller machines (ATMs), or because human psychology does not handle large numbers well. The authorities may alleviate this problem by redenomination: a new unit replaces the old unit with a fixed number of old units being converted to 1 new unit. If inflation is the reason for redenomination, this ratio is much larger than 1, usually a positive integral power of 10 like 100, 1000 or 1 million, and the procedure can be referred to as "cutting zeroes".[1] Recent examples include

New unit = x Old unit year
Fourth Zimbabwean dollar (ZWL) = 1 000 000 000 000 ZWR February 2009
Third Zimbabwean dollar (ZWR) = 10 000 000 000 ZWN August 2008
Second Zimbabwean dollar (ZWN) = 1 000 ZWD (first dollar) August 2006
New Mozambican metical = 1 000 old meticais 2006
This table is not exhaustive.

Although the ratio is often a positive integral power of 10, sometimes it can be a×10n where a is a single digit integer and n is a positive integer. Partial examples include

New unit = x Old unit year
Rentenmark = 1 000 billion Papiermark 1923
Chinese "gold" yuan = 3 million old yuan 1948
Chinese "silver" yuan = 500 million "gold" yuan 1949
New Taiwan dollar = 40 000 old dollars 1949
Azerbaijani new manat = 5 000 old manat 2006
This table is not exhaustive.

Occasionally, the ratio is defined in a way such that the new unit is equal to a hard currency. As a result, the ratio may not be based on an integer. Examples include

New unit = x Old unit = Anchor currency year
Brazilian real = 2 750 cruzeiros reais = United States dollar 1 July 1994
Yugoslav novi dinar = 10~13 million 1994 dinara = Euro 24 January 1994
This table is not exhaustive.

In the case of hyperinflation, the ratio can go as high as millions or billions, to a point where scientific notation is used for clarity or long and short scales are mentioned to disambiguate what kind of billion/trillion is meant.

In the case of chronic inflation which is expected to continue, the authorities have a choice between a large redenomination ratio and a small redenomination ratio. If a small ratio is used, another redenomination may soon be required, which will entail costs in the financial, accounting, and computing industries. However a large ratio may result in inconveniently large or small prices at some point in the cycle.

After a redenomination, the new unit is often has the same name as the old unit, with the addition of the word "new". The word "new" may or may not be dropped a few years after the change. Sometimes the new unit is a completely new name, or a "recycled" name from previous redenomination or from ancient times.

New unit = x Old unit year Nature of the new unit
Turkish new lira = 1 million old lira 2005 "new" is an official designation and has been dropped in 2009.
New Taiwan dollar = 40 000 old dollars 1949 "new" is an official designation and is still used in official documents today
Argentine austral = 1 000 Peso argentino 1985 completely new name
Yugoslav 1993 dinar = 1 million 1992 dinara 1993 no official designation
Brazilian real = 2 750 cruzeiros reais 1994 recycled unit of Brazil before 1942
This table is not exhaustive.

Monetary union[edit]

When countries form a monetary union, redenomination may be required. The conversion ratio is often not a round number, and may be less than 1.

New unit = x Old unit year Monetary union
Danish krone = 0.5 Danish rigsdaler 1873 Scandinavian Monetary Union
Gulden österreichischer Währung = 20/21 Gulden Conventions-Münze 1858 Wiener Münzvertrag between the states of the German Customs Union and the Austrian Empire
Euro = 0.787564 Irish pound 1999/2002 Eurozone
Euro = 40.3399 Belgian or Luxembourgian francs 1999/2002 Eurozone
This table is not exhaustive.

Decimalisation[edit]

The currency was decimalised in all countries where a pounds-shillings-pence £sd system (£1 = 20 shillings = 240 pence) was previously used. Several countries chose to change the main currency unit at the same time. By defining 1 dollar = £0.5 = 100 cents, 1 shilling would conveniently turn into 10 cents.

New unit = x Old unit year
Germany German gold mark = 1/3 Vereinsthaler 1873
United Kingdom (New) Penny = 2.4 Penny 1971
South Africa South African rand = 0.5 South African pound 1961
Australia Australian dollar = 0.5 Australian pound 1966
New Zealand New Zealand dollar = 0.5 New Zealand pound 1967
This table is not exhaustive.

List of currency redenominations[edit]

This table lists various currency redenominations that have occurred, including currency renaming where the conversion rate is 1:1, but excluding decimalisation.

New unit Exchange rate (new:old) Old unit Year Country Cause Note
!a -9e99 !a !a !a !a !a
~z 9e99 ~z ~z ~z ~z ~z
Zimbabwean Dollar (4th) 1e12 ! 1 000 000 000 000 Zimbabwean Dollar (3rd) 2009 Zimbabwe Hyperinflation Subsequently abandoned.
Zimbabwean Dollar (3rd) 1e10 ! 10 000 000 000 Zimbabwean Dollar (2nd) 2008 Zimbabwe Hyperinflation
Yugoslav 1994 dinar 1e6 ! 1 000 000 000 1993 dinara 1994 Yugoslavia hyperinflation Lasted for 23 days.
Chinese "silver" yuan 5e8 ! 500 000 000 "gold" yuan 1949 China (Republic of China) inflation
Yugoslav novi dinar 1.3e7 ! 13 000 000[2] 1994 dinara 1994 Yugoslavia inflation Anchor currency: Euro
Chinese "gold" yuan 3e6 ! 3 000 000 (old) yuan 1948 China (Republic of China) inflation
Peruvian nuevo sol 1e6 ! 1 000 000 Peruvian inti 1991 Peru hyperinflation "nuevo" is an official designation and is still in use
Yugoslav 1993 dinar 1e6 ! 1 000 000 1992 dinara 1993 Yugoslavia inflation no official designation
Turkish new lira 1e6 ! 1 000 000 Turkish lira 2005 Turkey inflation "new" is an official designation and has been dropped in 2009[dated info]
Hryvnia 1e5 ! 100 000 Karbovanets (third) 1996 Ukraine inflation
New Taiwan dollar 4e4 ! 40 000 Taiwan dollars 1949 Taiwan (Republic of China) inflation "new" is an official designation and is still used in official documents
Second Renminbi yuan 1e4 ! 10 000 First Renminbi yuan 1955 China (Peoples Republic of China) inflation
Peso argentino 1e4 ! 10 000 Peso ley 1983 Argentina inflation
Peso (convertible) 1e4 ! 10 000 Austral 1992 Argentina inflation
Polish złoty 1e4 ! 10 000 Polish złoty 1995 Poland inflation
Leu 1e4 ! 10 000 Romanian leu 2005 Romania inflation
New Ghanaian cedi 1e4 ! 10 000 Cedi 2007 Ghana inflation
Azerbaijani new manat 5000 ! 5 000 (old) manat 2006 Azerbaijan inflation
Turkmenistani new manat 5000 ! 5 000 (old) manat 2009 Turkmenistan inflation
Real 2750 ! 2 750 Cruzeiro real 1994 Brazil inflation Anchor currency: United States dollar
Cruzeiro (antigo) 1000 ! 1 000 Real (old) 1942 Brazil inflation
Cruzeiro (novo) 1000 ! 1 000 Cruzeiro (antigo) 1967 Brazil inflation
Austral 1000 ! 1 000 Peso argentino 1985 Argentina inflation
Peruvian inti 1000 ! 1 000 Peruvian sol 1985 Peru inflation
Cruzado 1000 ! 1 000 Cruzeiro (novo) 1986 Brazil inflation
Cruzado Novo 1000 ! 1 000 Cruzado 1989 Brazil inflation
Cruzeiro real 1000 ! 1 000 Cruzeiro (third) 1993 Brazil inflation
New Shekel 1000 ! 1 000 Shekel 1986 Israel inflation
Russian ruble 1000 ! 1 000 Rouble 1998 Russia inflation
Bulgarian new lev 1000 ! 1 000 Bulgarian lev 1999 Bulgaria inflation Anchor currency: German mark
Belarusian ruble 1000 ! 1 000 Rouble 2000 Belarus inflation
New Mozambican metical 1000 ! 1 000 (old) meticais 2006 Mozambique inflation
Bolivar Fuerte 1000 ! 1 000 (old) Bolivar 2008 Venezuela inflation
Zimbabwean dollar (2nd) 1000 ! 1 000 Zimbabwean dollar (1st) 2006 Zimbabwe inflation
Euro 239.64 Slovenian tolar 2006 Slovenia monetary union Eurozone
Euro 6.55957 French Franc 1999 France monetary union Eurozone
New French Franc 100 French Franc 1960 France inflation "New" was a temporary designation dropped in 1963
Peso ley 100 Peso moneda nacional 1970 Argentina inflation
Icelandic króna 100 Icelandic króna 1981 Iceland hyperinflation
Euro 40.3399 Belgian or Luxembourgian francs 1999 Belgium Luxembourg monetary union Eurozone
Euro 30.126 Slovak koruna 2009 Slovakia monetary union Eurozone
Peso moneda nacional 25 Peso moneda corriente 1881 Argentina inflation
Peso moneda corriente 8 ! 8 Real 1826 Argentina
Euro 1.95583 Deutsche Mark 1999 Germany monetary union Eurozone
Cruzeiro (third) 1 Cruzado Novo 1990 Brazil renaming
Karbovanets (third) 1 Soviet ruble 1992 Ukraine Independence
Euro 0.787564 Irish pound 1999 Ireland monetary union Eurozone
Euro 0.585274 Cypriot pound 2008 Cyprus monetary union Eurozone
Austro-Hungarian krone 0.5 gulden/forint 1892 Austria-Hungary monetary union Moving from silver to gold standard
Euro 0.4293 Maltese lira 2008 Malta monetary union Eurozone

See also[edit]

References[edit]

  1. ^ "Finance Ministry and National Bank decide to slash four zeroes from ROL's tail | Ziarul Financiar". Zf.ro. 2004-01-29. Retrieved 2010-01-06. [dead link]
  2. ^ Pegged to the Deutsche Mark upon renomination, but subsequently subject to drift