ABSTRACT
This research examines the impact of currency redenomination on national economic indicators in six diverse countries: Ghana, Afghanistan, Uganda, Zimbabwe, Argentina, and Zambia. Currency redenomination involves reissuing a nation's currency with a lower face value and is often used by countries facing economic challenges like hyperinflation. However, the effects of this process on economic indicators are not well-understood, leading to contradictory findings in existing literature.
The study aims to fill these gaps by investigating how currency redenomination influences key economic indicators such as inflation, economic growth, standard of living, and income growth in the selected countries. It also formulates hypotheses to test the significance of these effects. The research findings are expected to benefit governments, central banks, businesses, economists, and the public by providing insights for policy-making, decision-making, and a better understanding of the relationship between currency redenomination and economic indicators.
The research employs the event study methodology and focuses on countries that have recently undergone currency redenomination, ensuring diversity and relevance. Secondary data from reputable sources like the World Bank, IMF, central banks, and governmental documents are used to construct a comprehensive dataset. The study is theoretically grounded in monetary theory, recognizing the influence of currency redenomination on the money supply and its potential impact on economic indicators.
For data analysis, linear regression models are used, with currency redenomination as the independent variable. The study discusses the expected impact on each economic indicator, considering both short-term disruptions and long-term effects. The difference-in-differences (DiD) regression technique is employed to isolate the effects of currency redenomination from other factors, and parallel trend analysis ensures the validity of the method.
This research offers a thorough analysis of the relationship between currency redenomination and economic indicators, benefiting governments, central banks, businesses, economists, and the public. It contributes to understanding the complex dynamics of currency redenomination and its implications for economic stability and growth.
