LOST IN MONETARY TRANSLATION :
MONETARY SINGLENESS AND RELATIVE PRICE DISTORTIONS

Abstract:

This paper studies how currency conversion can disrupt relative prices by impairing the unit-ofaccount
function of money. We examine Okinawa’s 1972 conversion from the U.S. dollar to the
Japanese yen, following the collapse of a previously shared unit-of-account triggered by the Nixon
shock. Using wholesale price data for perishable goods, we showthat relative prices exhibited sharp
changes despite flexible prices. By contrast, Okinawa’s 1958 currency conversion used a single,
clearly announced rate and left relative prices stable. The comparison highlights the importance of
institutional clarity for a shared unit of account and stable relative prices.