Redenomination

In general, redenomination is implemented in response to hyperinflation, which progressively increases the nominal prices of products and services, decreasing the real value of the monetary unit in the local market. Over time, prices become excessively large, which can impede routine 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. Authorities may alleviate this problem by redenomination: introducing a new unit that 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 of redenominations, include:

Although the ratio is often a positive integral power of 10 (ie., removing some zeros), sometimes it can be a×10ⁿ where a is a single-digit integer and n is a positive integer. Partial examples include

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

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 which kind of billion or 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 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.

All countries that previously had currencies based on pounds-shillings-pence (£sd) system (£1 = 20 shillings = 240 pence) have now adopted decimal currencies (currencies related by powers of 10), with several changing the name of the main currency unit at the same time. As of 2020, only two currencies are non-decimal, being the Mauritanian ouguiya and Malagasy ariary, with one of each divided into five subdivisory units.

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

This table lists various currency redenominations that have occurred, including currency renaming where the conversion rate is 1:1, but excluding decimalisation and joining the eurozone, already listed on the table above.

Japanese invasion money suffered from heavy inflation. At the end of World War II governments of liberated countries and territories opted to simply declare them worthless.

In 2016, the Colombian peso was rated at around 3,000 per U.S. dollar, with banknotes up to 50,000 pesos. Instead of redenominating the currency, a new banknote design was introduced, with the last three zeroes replaced by the word "mil" (thousand), making the values easier to read.

• Decimalisation
• Denomination (currency)
• Devaluation
• Dollarization
• Hyperinflation
• Inflation