Lost in Monetary Translation: Monetary Singleness and Relative Price Distortions

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.