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A tale of two Cedis: Making sense of a new currency in Ghana

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  • Dzokoto, Vivian Afi Abui
  • Young, Jessica
  • Mensah, Clifford Edwin

Abstract

Ghana (West Africa) underwent a currency change in July 2007. This paper explores the adaptation to the New Ghana Cedi one year post-redenomination using the theoretical framework of the Money Illusion Effect and the relearning-rescaling hypotheses. Study 1 revealed that the old and new currencies appeared to be valued similarly, based on the ratings of gains and losses in the old and new currencies. This result is consistent with the slogan of the Ghanaian redenomination public education campaign and suggests that people can be inoculated against the Money Illusion Effect through education. In study 2, attributes of the new currency were rated more positively than those of the old currency, suggesting a preference for the New Ghana Cedi.

Suggested Citation

  • Dzokoto, Vivian Afi Abui & Young, Jessica & Mensah, Clifford Edwin, 2010. "A tale of two Cedis: Making sense of a new currency in Ghana," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 520-526, August.
    • Handle: RePEc:eee:joepsy:v:31:y:2010:i:4:p:520-526
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    References listed on IDEAS

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    1. Eldar Shafir & Peter Diamond & Amos Tversky, 1997. "Money Illusion," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 341-374.
    2. Bart Hobijn & Federico Ravenna & Andrea Tambalotti, 2006. "Menu Costs at Work: Restaurant Prices and the Introduction of the Euro," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(3), pages 1103-1131.
    3. Tyszka, Tadeusz & Przybyszewski, Krzysztof, 2006. "Cognitive and emotional factors affecting currency perception," Journal of Economic Psychology, Elsevier, vol. 27(4), pages 518-530, August.
    4. Leiser, David & Izak, Gilad, 1987. "The money size illusion as a barometer of confidence? The case of high inflation in Israel," Journal of Economic Psychology, Elsevier, vol. 8(3), pages 347-356, September.
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    1. Bulan Prabawani & Ita Hanika Musfirowati & Eri Werdani Riandhita, 2018. "Socialization: An important factor of redenomination success in Indonesia," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(3), pages 700-712, June.
    2. Erwin Bramana Karnadi & Putu Rusta Adijaya, 2017. "Redenomination: Why is It Effective in One Country but Not in Another?," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 186-195.
    3. Ojuolape Adebayo Mohammed & Yusuf H. Agboola & Alabi K. Moshood & Oladipupo O. Abdullah, 2020. "The Effects of Currency Devaluation on Output Growth in Developing Economies with Currency Crises," Working Papers 7, Department of Economics, University of Ilorin.

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