<p>The usual rationale for replacing notes with coins is that small-denomination notes and coins circulate heavily, and notes need to be replaced much more often than coins. However, as an example, the costs of transitioning to a dollar coin (think vending machines, etc.) in the U.S. would be significant enough to make the change not worthwhile, according to a FRB staff working paper. See "<a href="http://www.federalreserve.gov/paymentsystems/staff-working-paper-20131211.pdf" rel="nofollow">Costs and Benefits of Replacing the \$1 Federal Reserve Note with a $1 U.S. Coin</a>" for details on their approach, which covers the issues pretty well.</p>

CC BY-SA 3.0
2015-03-23T21:07:00.420Z
Yeah, this is an interesting point. When New Zealand replaced all its silver coins (gold $1 and $2 coins remained unchanged) 10 years ago, all the vending machines needed to be replaced/refurbished. But as far as I know it happened pretty smoothly, I don't remember seeing uproar about it.
dwjohnston
CC BY-SA 3.0
2015-03-23T19:27:19.157Z
2015-03-23T19:27:19.157Z
dismalscience
<p>I had a quick look and couldn't find any useful resources for you. I know Australia removed 1c and 2c coins from circulation and the USA has considered removing their 1c coins. It was found to be very very expensive.</p>

<p>The other way around I can't imagine the economic costs would be too high. The main reason of changing relates to the preferences of consumers.</p>

CC BY-SA 3.0
2015-03-23T05:27:48.040Z
2015-03-23T05:27:48.040Z
Jamzy
<p>In New Zealand our lowest denomination note is a $5 note. </p>

<p>For perspective, a can of coke costs $1.50 - $2.00, a Big Mac costs around $5. </p>

<p>The idea of a <a href="http://www.stuff.co.nz/business/money/5321416/NZ-bank-notes-to-be-refreshed" rel="nofollow">$5 coin is on the cards</a>. </p>

<p>The question is - what effect does turning a note in to a coin have? </p>

<p>I imagine there would more of a piggybank effect (coins being lost, stuck in collection jars). </p>

<p>Are there any studies on what's happened when notes have been replaced by coins? </p>

CC BY-SA 3.0
2015-03-25T02:46:05.043Z
I question whether or not that effect will holdover once these denominations become sufficiently large. That is, people probably aren't as careless with a coin worth 5 as they they are with a coin worth $\phi5$ , $\phi \in (0,5)$.
123
CC BY-SA 3.0
2015-03-25T02:55:37.143Z
^Sure, but for example here where we have $1 and $2 coins, people are likely to drop them into donation jars, or they can roll out of their wallet.
dwjohnston
CC BY-SA 3.0
2015-03-25T03:02:08.390Z
I can't comment on how easily lost are coins because I so rarely use them. I doubt many Americans make coins a serious part of their money cash holdings (our coins have little value). However, I think the lower value of the 1 or 2 dollar coin relative to the 5 dollar coin is more influential on behavior than is the fact that a person is spending coins rather than paper money. So, I doubt transitioning your 5 dollar bill to a 5 dollar coin would cause consumers to adopt a significantly more frivolous attitude and become spendthrifts. Then again - I could be very wrong!
123
<currency>
What effect would converting the lowest denomination note to a coin be?
dwjohnston
# What effect would converting the lowest denomination note to a coin be?

(Asked by: username_0 on 2015-03-22)

In New Zealand our lowest denomination note is a $5 note.

For perspective, a can of coke costs $1.50 - $2.00, a Big Mac costs around $5.

The idea of a [$5 coin is on the cards](http://www.stuff.co.nz/business/money/5321416/NZ-bank-notes-to-be-refreshed).

The question is - what effect does turning a note in to a coin have?

I imagine there would more of a piggybank effect (coins being lost, stuck in collection jars).

Are there any studies on what's happened when notes have been replaced by coins?

**Tags:** currency

> **Comments:**
> **username_1**: I question whether or not that effect will holdover once these denominations become sufficiently large. That is, people probably aren't as careless with a coin worth 5 as they they are with a coin worth $\phi5$ , $\phi \in (0,5)$.  
> **username_0**: ^Sure, but for example here where we have $1 and $2 coins, people are likely to drop them into donation jars, or they can roll out of their wallet.  
> **username_1**: I can't comment on how easily lost are coins because I so rarely use them. I doubt many Americans make coins a serious part of their money cash holdings (our coins have little value). However, I think the lower value of the 1 or 2 dollar coin relative to the 5 dollar coin is more influential on behavior than is the fact that a person is spending coins rather than paper money. So, I doubt transitioning your 5 dollar bill to a 5 dollar coin would cause consumers to adopt a significantly more frivolous attitude and become spendthrifts. Then again - I could be very wrong!  

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## 2 answers

### Answer by username_2 on 2015-03-23. Score: 2

The usual rationale for replacing notes with coins is that small-denomination notes and coins circulate heavily, and notes need to be replaced much more often than coins. However, as an example, the costs of transitioning to a dollar coin (think vending machines, etc.) in the U.S. would be significant enough to make the change not worthwhile, according to a FRB staff working paper. See "[Costs and Benefits of Replacing the \$1 Federal Reserve Note with a $1 U.S. Coin](http://www.federalreserve.gov/paymentsystems/staff-working-paper-20131211.pdf)" for details on their approach, which covers the issues pretty well.

> **Comments:**
> **username_0**: Yeah, this is an interesting point. When New Zealand replaced all its silver coins (gold $1 and $2 coins remained unchanged) 10 years ago, all the vending machines needed to be replaced/refurbished. But as far as I know it happened pretty smoothly, I don't remember seeing uproar about it.  

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### Answer by username_3 on 2015-03-23. Score: 0

I had a quick look and couldn't find any useful resources for you. I know Australia removed 1c and 2c coins from circulation and the USA has considered removing their 1c coins. It was found to be very very expensive.

The other way around I can't imagine the economic costs would be too high. The main reason of changing relates to the preferences of consumers.


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