IDEAS home Printed from https://ideas.repec.org/a/bla/ehsrev/v76y2023i2p477-497.html
   My bibliography  Save this article

One country, two currencies: The adoption of the Hong Kong currency board, 1983

Author

Listed:
  • Asa Malmstrom Rognes
  • Catherine R. Schenk

Abstract

Currency boards have had an enduring attraction as a solution to exchange rate and monetary credibility for small open economies, despite few successful examples. In this context, the case of Hong Kong stands out for its longevity; it survived the handover to China, the Asian financial crises in 1997, and the global crises in 2007–8 and 2020. The 1983 currency crisis and the decision to link the exchange rate to the US$ is usually treated as an outcome of local political uncertainty due to the Sino‐British negotiations which set the framework for how Hong Kong would fit with the rest of China after 1997. We present fresh archival evidence from Hong Kong and London to reveal the year‐long debates over Hong Kong's monetary system after a drop in the exchange rate in September 1982 and to demonstrate how most of the protagonists in Hong Kong and London came only reluctantly to accept the idea of re‐pegging the dollar once public expectations had been raised. We also show how the mixture of currency and banking instability affected the terms of the negotiations in 1982 and 1983 and set the framework for the one country, two currencies system that prevails today.

Suggested Citation

  • Asa Malmstrom Rognes & Catherine R. Schenk, 2023. "One country, two currencies: The adoption of the Hong Kong currency board, 1983," Economic History Review, Economic History Society, vol. 76(2), pages 477-497, May.
    • Handle: RePEc:bla:ehsrev:v:76:y:2023:i:2:p:477-497
    DOI: 10.1111/ehr.13211
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/ehr.13211
    Download Restriction: no
    File URL: https://libkey.io/10.1111/ehr.13211?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ito, Hiro & McCauley, Robert N., 2019. "A key currency view of global imbalances," Journal of International Money and Finance, Elsevier, vol. 94(C), pages 97-115.
    2. Schenk, Catherine R., 2020. "The origins of the Asia dollar market 1968–1986: regulatory competition and complementarity in Singapore and Hong Kong," Financial History Review, Cambridge University Press, vol. 27(1), pages 17-44, April.
    3. David T. Beers & Thomas J. Sargent & Neil Wallace, 1983. "Speculations about the speculation against the Hong Kong dollar," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 7(Fall).
    4. Boris Blagov & Michael Funke, 2016. "The Credibility of Hong Kong's Currency Board System: Looking Through the Prism of MS-VAR Models with Time-Varying Transition Probabilities," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(6), pages 895-914, December.
    5. Koichi Hamada & Yosuke Takeda, 2001. "The Choice Between Flexible Exchange Rates, Capital Control and the Currency Board in Asian Countries: A Perspective from the “Impossible Trinity”," The Japanese Economic Review, Japanese Economic Association, vol. 52(4), pages 429-451, December.
    6. Hans Genberg & Cho-Hoi Hui, 2011. "The Credibility of Hong Kong's Link from the Perspective of Modern Financial Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(1), pages 185-206, February.
    7. Catherine Schenk & John Singleton, 2011. "Basket Pegs And Exchange Rate Regime Change: Australia And New Zealand In The Mid‐Seventies," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 51(2), pages 120-149, July.
    8. Holger C. Wolf & Atish R. Ghosh & Helge Berger & Anne-Marie Gulde, 2008. "Currency Boards in Retrospect and Prospect," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262232650, December.
    9. Schenk, Catherine R., 2009. "The evolution of the Hong Kong currency board during global exchange rate instability, 1967–19731," Financial History Review, Cambridge University Press, vol. 16(2), pages 129-156, October.
    10. John Williamson, 1995. "What Role of Currency Boards?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa40, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Feng, Shu & Fu, Liang & Ho, Chun-Yu & Alex Ho, Wai-Yip, 2023. "Political stability and credibility of currency board," Journal of International Money and Finance, Elsevier, vol. 137(C).
    2. Dorota Zuchowska, 2015. "Accession To The Eurozone As Lithuania’S Exit Strategy From The Currency Board System," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 10(3), pages 27-43, September.
    3. Boris Blagov & Michael Funke, 2016. "The Credibility of Hong Kong's Currency Board System: Looking Through the Prism of MS-VAR Models with Time-Varying Transition Probabilities," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(6), pages 895-914, December.
    4. Gedeon Shirley, 2010. "The Political Economy of Currency Boards: Case of Bosnia and Herzegovina," South East European Journal of Economics and Business, Sciendo, vol. 5(2), pages 7-20, November.
    5. Dorota Zuchowska, 2015. "Accession to the Eurozone as Lithuania’s exit strategy from the currency board system," Working Papers 10/2015, Institute of Economic Research, revised Feb 2015.
    6. repec:zbw:bofitp:1999_009 is not listed on IDEAS
    7. Raoul Lättemäe, 2001. "Monetary transmission mechanism in Estonia - some theorethical considerations and stylized aspects," Bank of Estonia Working Papers 2001-4, Bank of Estonia, revised 13 Oct 2001.
    8. Cobham, David, 2022. "Monetary policy frameworks since Bretton Woods, across the world and its regions," MPRA Paper 114466, University Library of Munich, Germany.
    9. Blagov, Boris & Funke, Michael, 2019. "The Regime-Dependent Evolution Of Credibility: A Fresh Look At Hong Kong'S Linked Exchange Rate System," Macroeconomic Dynamics, Cambridge University Press, vol. 23(6), pages 2434-2468, September.
    10. repec:cbk:journl:v:2:y:2013:i:2:p:71-84 is not listed on IDEAS
    11. Shinji Takagi & Mototsugu Shintani & Tetsuro Okamoto, 2004. "Measuring the Economic Impact of Monetary Union: The Case of Okinawa," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 858-867, November.
    12. Neven Valev, 2000. "Building Monetary Credibility in a Transforming Economy," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0212, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    13. Emil Kalchev, 2015. "The Currency Board In Bulgaria – Staus Quo And Perspectives," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 9(1), pages 554-562.
    14. Schroth, Josef, 2021. "Macroprudential policy with capital buffers," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 296-311.
    15. Pastor Jr., Manuel & Wise, Carol, 1999. "Stabilization and its Discontents: Argentina's Economic Restructuring in the 1990s," World Development, Elsevier, vol. 27(3), pages 477-503, March.
    16. Guergana Stanoeva, 2004. "Les caisses d’émission des Pays Baltes et de la Bulgarie : la recherche d’une crédibilité renforcée," Revue d'Économie Financière, Programme National Persée, vol. 75(2), pages 85-112.
    17. Boger, Tal, 2017. "British Imperialism and Portfolio Choice in the Currency Boards of Palestine, East Africa, and West Africa," Studies in Applied Economics 86, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
    18. Richard W. Kopcke, 1999. "Currency boards: once and future monetary regimes?," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 21-37.
    19. Tony Addison & Alemayehu Geda & Philippe Le Billon & S Mansoob Murshed, 2005. "Reconstructing and Reforming the Financial System in Conflict and 'Post-Conflict' Economies," Journal of Development Studies, Taylor & Francis Journals, vol. 41(4), pages 703-718.
    20. Dumitriu, Ramona & Stefanescu, Razvan, 2013. "Utilizarea cursurilor valutare drept ancore nominale antiinflaţioniste [The use of exchange rates as nominal anchors]," MPRA Paper 52415, University Library of Munich, Germany.
    21. Bekaert, Geert & Mehl, Arnaud, 2019. "On the global financial market integration “swoosh” and the trilemma," Journal of International Money and Finance, Elsevier, vol. 94(C), pages 227-245.
    22. Neven Valev & John Carlson, 2007. "Beliefs about Exchange‐Rate Stability: Survey Evidence from the Currency Board in Bulgaria," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 10(2), pages 111-121.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ehsrev:v:76:y:2023:i:2:p:477-497. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/ehsukea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.