Currency Reforms in Emerging-Market and Transition Economies

Currency reforms have been implemented every so often in emerging-market and transition economies. A currency reform is a prearranged redenomination or alteration of the currency, sometimes with confiscatory elements. Currency reforms may be introduced as part of a disinflationary stabilization programme, when territorial or political changes warrant the introduction of a new currency, or when a country joins a currency union. A currency reform may be a useful step in obtaining or retaining macroeconomic stability, but the outcome of the reform rests on the acceptance and credibility of the new currency. The details of the implementation of a currency reform and in particular of the accompanying policy measures are of crucial importance for a successful currency reform.