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A Structural Investigation into the Price and Wage Dynamics in Hong Kong

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  • Michael Cheng

    (Research Department, Hong Kong Monetary Authority)

  • Wai-Yip Alex Ho

    (Research Department, Hong Kong Monetary Authority)

Abstract

This paper estimates the degree of wage and price flexibility of the Hong Kong economy with the use of a stylised dynamic stochastic general equilibrium (DSGE) model developed for the Hong Kong economy. It also studies the factors contributing to deflation in Hong Kong following the Asian financial crisis (i.e. during the period from 1998 to 2003) and finds that declining import prices were the main culprit. Consistent with earlier studies on the subject and anecdotal evidence, wages and prices in Hong Kong are found to be (relatively) flexible.

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File URL: http://www.hkma.gov.hk/media/eng/publication-and-research/research/working-papers/HKMAWP09_20_full.pdf
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Bibliographic Info

Paper provided by Hong Kong Monetary Authority in its series Working Papers with number 0920.

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Length: 17 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:hkg:wpaper:0920

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Keywords: DSGE; Bayesian Estimation; Nominal Rigidities;

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References

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  1. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc.
  2. James Yetman, 2009. "Hong Kong Consumer Prices are Flexible," Working Papers, Hong Kong Institute for Monetary Research 052009, Hong Kong Institute for Monetary Research.
  3. Adolfson, Malin & Laseen, Stefan & Linde, Jesper & Villani, Mattias, 2007. "Bayesian estimation of an open economy DSGE model with incomplete pass-through," Journal of International Economics, Elsevier, Elsevier, vol. 72(2), pages 481-511, July.
  4. Alejandro Justiniano & Bruce Preston, 2006. "Can Structural Small Open Economy Models Account For The Influence Of Foreign Disturbances?," CAMA Working Papers, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University 2006-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  5. Vasco Cúrdia & Daria Finocchiaro, 2007. "Monetary regime change and business cycles," Staff Reports, Federal Reserve Bank of New York 294, Federal Reserve Bank of New York.
  6. Hans Genberg & LaurentL. Pauwels, 2005. "An Open-Economy New Keynesian Phillips Curve: Evidence From Hong Kong," Pacific Economic Review, Wiley Blackwell, Wiley Blackwell, vol. 10(2), pages 261-277, 06.
  7. Funke, Michael & Paetz, Michael & Pytlarczyk, Ernest, 2011. "Stock market wealth effects in an estimated DSGE model for Hong Kong," Economic Modelling, Elsevier, Elsevier, vol. 28(1), pages 316-334.
  8. Frank Smets & Raf Wouters, 2002. "An estimated dynamic stochastic general equilibrium model of the euro area," Working Paper Research, National Bank of Belgium 35, National Bank of Belgium.
  9. Frank Leung & Gaofeng Han & Kevin Chow, 2009. "Financial Services Sector as a Driver of Productivity Growth in Hong Kong," Working Papers, Hong Kong Monetary Authority 0914, Hong Kong Monetary Authority.
  10. Thomas Lubik & Frank Schorfheide, 2005. "A Bayesian Look at New Open Economy Macroeconomics," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 521, The Johns Hopkins University,Department of Economics.
  11. Paul D. McNelis, 2009. "Structural Change and Counterfactual Inflation-Targeting in Hong Kong," Working Papers, Hong Kong Institute for Monetary Research 232009, Hong Kong Institute for Monetary Research.
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