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Author: Yum K. Kwan Publisher: ISBN: Category : Currency boards Languages : en Pages : 46
Book Description
The paper discusses the historical background and institutional details of Hong Kong's currency board. We argue that its experience provides a good opportunity to test the macroeconomic implications of the currency board regime. Using the method of Blanchard and Quah (1989), we show that the parameters of the structural equations and the characteristics of supply and demand shocks have significantly changed since adopting the regime. Variance decomposition and impulse response analyses indicate Hong Kong's currency board is less susceptible to supply shocks, but demand shocks can cause greater short-term volatility under the system. The decent performance of Hong Kong's currency board is due mainly to the stable fiscal policy of its government. Counter-factual exercises also show that three-fourths of the reduction in observed output volatility and two-thirds of that in observed inflation volatility are explained by the adoption of the currency board, while the remainder is explained by changes in the external environment. The improvement in stability does not rule out the possibility of monetary collapse, however.
Author: Yum K. Kwan Publisher: ISBN: Category : Currency boards Languages : en Pages : 46
Book Description
The paper discusses the historical background and institutional details of Hong Kong's currency board. We argue that its experience provides a good opportunity to test the macroeconomic implications of the currency board regime. Using the method of Blanchard and Quah (1989), we show that the parameters of the structural equations and the characteristics of supply and demand shocks have significantly changed since adopting the regime. Variance decomposition and impulse response analyses indicate Hong Kong's currency board is less susceptible to supply shocks, but demand shocks can cause greater short-term volatility under the system. The decent performance of Hong Kong's currency board is due mainly to the stable fiscal policy of its government. Counter-factual exercises also show that three-fourths of the reduction in observed output volatility and two-thirds of that in observed inflation volatility are explained by the adoption of the currency board, while the remainder is explained by changes in the external environment. The improvement in stability does not rule out the possibility of monetary collapse, however.
Author: Tony Latter Publisher: Hong Kong University Press ISBN: 9622098762 Category : Business & Economics Languages : en Pages : 164
Book Description
Since 1983 Hong Kong has pegged its currency to the US dollar through a currency board system that is unique among the world's advanced economies. In this first comprehensive book about Hong Kong's monetary system, Tony Latter draws on his considerable experience in central banking generally, and with the Hong Kong Monetary Authority in particular, to give a detailed account of how the system operates; why it was introduced; what are the important differences from other monetary regimes; and how it has performed. After a brief overview of Hong Kong's currency board system, two chapters explain the key features of mainstream monetary policy as practised in most economies and how the currency board differs. Then three chapters deal with the history of money in Hong Kong from the mid-1930s, describing the salient events and changes of the period up to the 1983 crisis and the consequent re-adoption of the currency board. Descriptions of the functioning of the system after 1983 and its evolution to the present day then follow. The book concludes with assessments of the performance of the currency board since 1983 and of the Hong Kong economy more widely. This book is designed both to inform lay readers and to provide substance for monetary economists. Given the key role of monetary policy in providing a stable foundation for a strong economy, the book is of importance for all business people in Hong Kong, while the more analytical sections provide essential reading for all students of economics.
Author: Tony Latter Publisher: ISBN: Category : Languages : en Pages : 44
Book Description
The three key changes to Hong Kong's monetary framework in the twentieth century are examined. In the first half of the 1930s, the rising price of silver caused mounting difficulties for China and Hong Kong, both then operating a silver standard. Consideration of a possible regime change in Hong Kong spread over a number of years, but it was always decided not to move before China. Eventually, when China left silver in 1935, Hong Kong left too and adopted what was effectively a sterling-based currency board. This is judged to have been the correct decision, although a case may be argued that the change should have taken place a couple of years earlier. In 1972, prompted by disenchantment with the weakness of sterling and the UK government's decision to let it float, the Hong Kong government abandoned both the sterling link and, in apparent ignorance of its fundamental monetary importance, the currency board principle. This propelled Hong Kong, which had no central bank at the time, into an era of monetary indeterminacy, where stability was dependent essentially on consensus and mutuality of interests between government and the principal banks. The system was destined to crack if ever market pressures exerted too great a strain, which they finally did in 1983. The currency board was then re-instituted, on this occasion based on the US dollar, and has succeeded in maintaining a stable exchange rate ever since. Various refinements in the years since 1983, including the establishment of the Monetary Authority in the role of a central bank, have made the system more robust. With a central bank, Hong Kong now has the capacity to operate an alternative monetary policy framework, should it so wish. For each of the three regime changes, this paper explores the background, both political and economic, the options which were considered and the reasons for the eventual decisions.
Author: Kwo Ping Tam Publisher: ISBN: Category : Currency boards Languages : en Pages : 320
Book Description
My thesis attempts to search evidence on the performance of the currency board regime and its impact on Hong Kong's economy. Three sets of related questions have been set up and carefully investigated in my empirical models. Chapter 2 investigates output growth and inflation rate in order to compare the historical performance of free-floating and currency board regimes for Hong Kong. I apply some advanced econometrics tools to identify my structural VAR models and offer appropriate analysis. My first empirical model suggests that output returns to a steady state much faster in a flexible exchange rate regime than in a fixed exchange rate regime after an aggregate demand shock. My evidence offers an essential answer to the question on why the recovering process of Hong Kong from the Asian financial crisis lasted longer compared with the other Asian countries with a flexible exchange rate regime. Furthermore, my counter-factual analysis suggests that a free-floating regime may generate much smaller output variance in Hong Kong and deliver higher output and price levels to Hong Kong. Chapter 3 investigates the currency board regime from 1984 to 2007, by considering some important variables which have significant impacts on Hong Kong's economy. For instance my empirical models attempt to examine the economic relationships with the US economy under the currency board regime and the close economic relationships with China under a Closer Economic Partnership Agreement with Mainland China. My models emphasises the importance of entrepot trade for Hong Kong's economy. Evidence shows that those exogenous variables have significant impacts on Hong Kong's economy, and they are one of the important factors when considering the choice of exchange rate regimes. My empirical evidence indicates some new findings which contradict existing studies which conclude that the Chinese economy is much less significant than the US economy in explaining Hong Kong's output variance. Chapter 4 examines the real effective exchange rate misalignment of the two economies, Hong Kong and Singapore, and offers new policy implications on the choice of exchange rate regimes. Entrepot trades are essential to both economies. While the literature has paid little attention to such an important character and shown evidence of larger scale REER misalignment in Hong Kong compared with Singapore, my model reveals that including such an important variable has remarkably improved the model and offered strikingly different conclusions. I have applied Vector Error Correction Modelling and the Johansson Method in identifying the empirical models. Evidence suggests that Hong Kong performs well in terms of small real exchange rate misalignment even under its currency broad regime. My thesis indicates that although there are limitations in the currency broad regime in terms of relatively slow recovery from external demand shocks and relatively larger output variance, the regime is still a preferable choice for Hong Kong, especially when we consider the close economic link with Mainland China and the United States. Moreover, there is no evidence in my models to suggest that the real exchange rate misalignment was significantly larger in the case of Hong Kong's currency board regime.
Author: Y. C. Jao Publisher: World Scientific ISBN: 9789810234812 Category : Business & Economics Languages : en Pages : 84
Book Description
Prepared by the East Asian Institute, NUS, which promotes research on East Asian developments particularly the political, economic and social development of contemporary China (including Hong Kong and Taiwan), this series of research reports is intended for policy makers and readers who want to keep abreast of the latest developments in China.
Author: C. Schenk Publisher: Springer ISBN: 0230594743 Category : Business & Economics Languages : en Pages : 211
Book Description
Hong Kong SAR is now highly unusual as a large economy running a currency board system that pegs the Hong Kong Dollar to the US Dollar. This volume explores the origins and persistence of this system, presenting the viewpoint of several of the main protagonists in the operation of the currency board since 1983 as well as new research by academics.
Author: Yum K. Kwan Publisher: ISBN: Category : Currency boards Languages : en Pages : 52
Book Description
The paper discusses the historical background and institutional details of Hong Kong's currency board. We argue that its experience provides a good opportunity to test the macroeconomic implications of the currency board regime. Using the method of Blanchard and Quah (1989), we show that the parameters of the structural equations and the characteristics of supply and demand shocks have significantly changed since adopting the regime. Variance decomposition and impulse response analyses indicate Hong Kong's currency board is less susceptible to supply shocks, but demand shocks can cause greater short-term volatility under the system. The decent performance of Hong Kong's currency board is due mainly to the stable fiscal policy of its government. Counter-factual exercises also show that three-fourths of the reduction in observed output volatility and two-thirds of that in observed inflation volatility are explained by the adoption of the currency board, while the remainder is explained by changes in the external environment. The improvement in stability does not rule out the possibility of monetary collapse, however.
Author: Goeksen Iyikoey Publisher: ISBN: 9783638660594 Category : Languages : de Pages : 68
Book Description
Seminar paper from the year 2005 in the subject Economics - Case Scenarios, grade: 2,3, University of Hamburg (Arbeitsbereich Makrookonomie und Quantitative Wirtschaftspolitik), course: Seminar "Economic Growth and Development in China," 24 entries in the bibliography, language: English, abstract: Currency Boards are extensions of Fixed Exchange Rate Regimes in which the domestic currency is pegged to a foreign currency. After Currency Boards have been largely replaced by central banks in the middle of last century, the system regained popularity in the 1980s and especially 1990s again. In this book, pros and cons of adopting a Currency Board System and the macroeconomic effects of the system on inflation, growth and unemployment are presented and discussed. Furthermore, the Hong Kong Currency Board (HKCB) is being analyzed as a main case including the following issues: description of tasks of the HKCB, difficulties in operating the system, predictability of US-Dollar purchases by the board and an analysis of the HKCB performance in the past.
Author: Christopher L. Culp Publisher: ISBN: Category : Languages : en Pages : 57
Book Description
A currency board is a monetary institution that issues notes and coins which are fully convertible into a reserve currency at a fixed rate on demand. Reserves are equal to 100 per cent, or slightly more, of a board's notes and coins. There have been over seventy currency boards and all have maintained convertibility, even during civil wars. Although successful, currency boards fell victim to changing economic fashions, and most were replaced by central banks after World War II. Hong Kong has one of the few remaining currency board systems, although that system remains largely unknown, even to monetary specialists. An analysis of the evolution and working of Hong Kong's system is presented in this text. Strengths and weaknesses of the current system are discussed, and measures to correct weaknesses are suggested. The desirability of the currency board system for developing countries, particularly those making the transformation from socialism to capitalism, is also examined.
Author: Yum K. Kwan
Author: Yum K. Kwan
Author: Tony Latter
Author: Tony Latter
Author: Kwo Ping Tam
Author: Y. C. Jao
Author: C. Schenk
Author: Yum-Keung Kwan
Author: Yum K. Kwan
Author: Goeksen Iyikoey
Author: Christopher L. Culp