There could
be many reasons for the issuance of the new-look of currency. Among others, the
central bank may issue a new currency in order to reduce the cost of printing
money. The material and technology used for the new currency may be cheaper as
compared to the old currency, thus giving the central bank higher seigniorage.
The next
reason may be to reduce the problem of counterfeiting money. Over time,
counterfeiters may improve their ability to imitate the currency. By
introducing a new-look of currency, the central bank is like pressing a reset
button to these counterfeiters. They now have to start all over again in order
to fake money.
There is
also a possibility that by introducing a new currency, the central bank may
keep track with the actual amount of currency in circulation. With the old
currency, some may not be in circulation due to a traditional saving method
(under the pillow), lost or dirty etc. With the introduction of the new currency,
people need to change to the new currency. Here, the central bank can up date
the actual amount of currency in circulation.
The
introduction of a new currency may also cause some difficulties. Some machines that
handle money (e.g. parking) , may need to be up-dated. The new money that comes
in equal size for all denominations may create difficulties to the blinds. The transition
period to the new currency may create confusion to some people. All these are
costs that are difficult to measure. It is hoped that a proper cost and benefit
analysis has been undertaken before the central bank decides to introduce the
new currency.
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