A Soft Edge Target Zone Model: Theory And Application To Hong Kong
AbstractHong Kong’s currency is pegged to the US dollar in a currency board arrangement. In autumn 2003, the Hong Kong dollar appreciated from close to 7.80 per US dollar to 7.70, as investors feared that the currency board would be abandoned. In the wake of this appreciation, the monetary authorities revamped the one-sided currency board mechanism into a symmetric two-sided system with a narrow exchange rate band. This paper reviews the characteristics of the new currency board arrangement and embeds a theoretical soft edge target zone model typifying many intermediate regimes, to explain the notable achievement of speculative peace and credibility since May 2005.
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.
Bibliographic InfoPaper provided by Economic Studies, University of Dundee in its series Dundee Discussion Papers in Economics with number 228.
Length: 20 pages
Date of creation: Nov 2009
Date of revision:
Currency Board Arrangement; Target Zone Model; Credibility; Hong Kong;
Other versions of this item:
- Chen, Yu-Fu & Funke, Michael & Glanemann, Nicole, 2009. "A Soft Edge Target Zone Model: Theory And Application To Hong Kong," SIRE Discussion Papers 2009-61, Scottish Institute for Research in Economics (SIRE).
- Chen, Yu-Fu & Funke, Michael & Glanemann, Nicole, 2009. "A soft edge target zone model: Theory and application to Hong Kong," BOFIT Discussion Papers 21/2009, Bank of Finland, Institute for Economies in Transition.
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
This paper has been announced in the following NEP Reports:
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.:
- Genberg, Hans & He, Dong & Leung, Frank, 2007. "Recent Performance Of The Hong Kong Dollar Linked Exchange Rate System," MPRA Paper 9440, University Library of Munich, Germany.
- Schmukler, Sergio L. & Serven, Luis, 2002. "Pricing currency risk under currency boards," Journal of Development Economics, Elsevier, vol. 69(2), pages 367-391, December.
- Labhard, Vincent & Wyplosz, Charles, 1996. "The New EMS: Narrow Bands inside Deep Bands," American Economic Review, American Economic Association, vol. 86(2), pages 143-46, May.
- Leonardo Bartolini & Alessandro Prati, 1998.
"Soft exchange rate bands and speculative attacks: theory and evidence from the ERM since August 1993,"
43, Federal Reserve Bank of New York.
- Bartolini, Leonardo & Prati, Alessandro, 1999. "Soft exchange rate bands and speculative attacks: theory, and evidence from the ERM since August 1993," Journal of International Economics, Elsevier, vol. 49(1), pages 1-29, October.
- Leonardo Bartolini & Alessandro Prati, 1998. "Soft Exchange Rate Bands and Speculative Attacks: Theory, and Evidence from the ERM since August 1993," IMF Working Papers 98/156, International Monetary Fund.
- Cheung, Yin-Wong & Erlandsson, Ulf G., 2005.
"Exchange Rates and Markov Switching Dynamics,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 23, pages 314-320, July.
- Yin-Wong Cheung & Ulf G. Erlandsson, 2004. "Exchange Rates and Markov Switching Dynamics," CESifo Working Paper Series 1348, CESifo Group Munich.
- Yin-wong Cheung & Ulf G. Erlandsson, 2005. "Exchange Rates and Markov Switching Dynamics," Working Papers 052005, Hong Kong Institute for Monetary Research.
- Westerhoff Frank H. & Reitz Stefan, 2003.
"Nonlinearities and Cyclical Behavior: The Role of Chartists and Fundamentalists,"
Studies in Nonlinear Dynamics & Econometrics,
De Gruyter, vol. 7(4), pages 1-15, December.
- Reitz, Stefan & Westerhoff, Frank, 2003. "Nonlinearities and Cyclical Behavior: The Role of Chartists and Fundamentalists," CFS Working Paper Series 2003/10, Center for Financial Studies (CFS).
- Fung, Hung-Gay & LEUNG, Wai K. & Zhu, Jiang, 2004. "Nondeliverable forward market for Chinese RMB: A first look," China Economic Review, Elsevier, vol. 15(3), pages 348-352.
- Guy Debelle & Jacob Gyntelberg & Michael Plumb, 2006. "Forward currency markets in Asia: lessons from the Australian experience," BIS Quarterly Review, Bank for International Settlements, September.
- Leonardo Bartolini & Alessandro Prati, 1997. "Soft versus hard targets for exchange rate intervention," Economic Policy, CEPR & CES & MSH, vol. 12(24), pages 13-52, 04.
- Dibeh, Ghassan, 2006. "Target zone dynamics where the fundamental follows a SDE with periodic forcing," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 363(2), pages 437-445.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Andrzej Kwiatkowski).
If references are entirely missing, you can add them using this form.