Currency Substitution in a Currency Board Context: The Evidence for Hong Kong
AbstractHong Kong is an open economy that uses foreign currencies extensively in domestic payments. This paper focuses on substitution between the domestic and foreign currencies in their role as media of payments in such an economy. It uses quarterly data to estimate currency substitution (CS) for Hong Kong during 1984:I to 2001:III when it had a fixed exchange rate under a currency board system. Two models, a money demand function and a dynamic adjustment model, are estimated using the Johansen cointegration and error-correction technique. The estimates for both these models indicate significant CS in the media of payments. Our estimates also show a significant ratchet effect in CS.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Journal of Chinese Economic and Business Studies.
Volume (Year): 4 (2006)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RCEA20
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lewis, Mervyn K. & Mizen, Paul D., 2000. "Monetary Economics," OUP Catalogue, Oxford University Press, number 9780198290629.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Joannes Mongardini & Johannes Mueller, 2000. "Ratchet Effects in Currency Substitution: An Application to the Kyrgyz Republic," IMF Staff Papers, Palgrave Macmillan, vol. 47(2), pages 3.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.