Good explanation of how and why countries redenominate or 'drop the zeros'

Currency redenomination also can be a means by which governments attempt to reassert
monetary sovereignty. If citizens lose confidence in the national currency, they may begin to use
foreign currencies, particularly those with greater prestige. This may be both a psychological and
an economic blow to the government: with widespread foreign currency substitution (or, more
extremely, full dollarization), the central bank no longer controls the money supply, rendering it
unable to provide lender of last resort functions (Cohen 2004). Economic policy is influenced
not only by international capital markets (e.g. Mosley 2003), but also by foreign central banks.
Currency redenomination, then, is a means by which governments can attempt to reverse this
currency substituting behavior: if citizens are confident that the new Turkish lira will hold its
value, they may be willing to shift from using euros and dollars to using lira. While the act of
dividing a currency’s value by a factor of ten is somewhat symbolic, it also can help to convince
citizens of a currency’s worth. As a result, redenominations often occur after economic crises, as
governments attempt to convince citizens and markets that hyperinflation is a thing of the past.
In some cases, the timing is correct, in that redenomination caps off high levels of inflation. In
other cases, governments are not able to reign in inflation immediately after redenomination,
and they may make multiple efforts at currency reform. Argentina and Brazil during the 1980s
and early 1990s exemplify this pattern.