What effect would removing the lowest denomination currency have?
The practice of rounding to the smallest currency unit is called Swedish rounding. I know of a few papers that discuss likely economic concequences. 

Eliminating the Penny from the U. S. Coinage System: An Economic Analysis Lombra (2001) 

Time to Eliminate the Penny from the U.S. Coinage System: New Evidence Whaples (2007)

Pennies, Pricing, and Rounding: Is All the Relevant Analysis in? Lombra (2007)