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Choice of Exchange Rate Regime: Currency Board (Hong Kong) or Monitoring Band (Singapore)?

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  • Ramkishen S. Rajan
  • Reza Siregar

Abstract

Following the East Asian crisis, a number of observers have advocated that small and open economies in Asia adopt an irrevocably fixed regime. Such a hard peg, it is argued, signals greater commitment to rule out arbitrary exchange rate adjustments as well as the authorities' willingness to subordinate domestic policy objectives such as output and employment growth to the maintenance of the pegged exchange rate. But is this a reasonable position to adopt? In order to answer this question, we consider and contrast the experiences of Hong Kong and Singapore. While both of these economies share a number of broad similarities, the former operates a US dollar-linked currency board arrangement and the latter maintains an adjustable peg in the form of a monitoring band arrangement with the central parity based on an undisclosed trade-weighted currency basket. Copyright Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia 2002.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Australian Economic Papers.

Volume (Year): 41 (2002)
Issue (Month): 4 (December)
Pages: 538-556

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Handle: RePEc:bla:ausecp:v:41:y:2002:i:4:p:538-556

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  1. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, January.
  2. G. Bird & R. Rajan, 2001. "Would International Currency Taxation and Currency Stabilisation in Developing Countries?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(3), pages 21-38.
  3. Ramikishen Rajan, 2002. "Exchange Rate Policy Options for Post-crisis Southeast Asia: Is There a Case for Currency Baskets?," The World Economy, Wiley Blackwell, vol. 25(1), pages 137-163, 01.
  4. Ramkishen S. Rajan & Rahul Sen & Reza Y. Siregar, 2002. "Hong Kong, Singapore and the East Asian Crisis: How Important were Trade Spillovers?," The World Economy, Wiley Blackwell, vol. 25(4), pages 503-537, 04.
  5. Sebastian Edwards & Miguel A. Savastano, 1999. "Exchange Rates in Emerging Economies: What Do We Know? What Do We Need to Know?," NBER Working Papers 7228, National Bureau of Economic Research, Inc.
  6. John Williamson, 1999. "Crawling Bands or Monitoring Bands: How to Manage Exchange Rates in a World of Capital Mobility," Policy Briefs PB99-03, Peterson Institute for International Economics.
  7. Hausmann, Ricardo & Panizza, Ugo & Stein, Ernesto, 2001. "Why do countries float the way they float?," Journal of Development Economics, Elsevier, vol. 66(2), pages 387-414, December.
  8. Lu, Ding & Yu, Qiao, 1999. "Hong Kong's exchange rate regime:: Lessons from Singapore," China Economic Review, Elsevier, vol. 10(2), pages 122-140.
  9. repec:fth:inadeb:418 is not listed on IDEAS
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