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

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Author Info

  • 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. Alejandro Justiniano & Bruce Preston, 2006. "Can Structural Small Open Economy Models Account For The Influence Of Foreign Disturbances?," CAMA Working Papers 2006-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Adolfson, Malin & Laséen, Stefan & Lindé, Jesper & Villani, Mattias, 2005. "Bayesian Estimation of an Open Economy DSGE Model with Incomplete Pass-Through," Working Paper Series 179, Sveriges Riksbank (Central Bank of Sweden).
  3. Vasco Cúrdia & Daria Finocchiaro, 2007. "Monetary regime change and business cycles," Staff Reports 294, Federal Reserve Bank of New York.
  4. Funke, Michael & Paetz, Michael & Pytlarczyk, Ernest, 2011. "Stock market wealth effects in an estimated DSGE model for Hong Kong," Economic Modelling, Elsevier, vol. 28(1-2), pages 316-334, January.
  5. Lawrence F. Katz & Olivier Blanchard, 1999. "Wage Dynamics: Reconciling Theory and Evidence," American Economic Review, American Economic Association, vol. 89(2), pages 69-74, May.
  6. Hans Genberg & LaurentL. Pauwels, 2005. "An Open-Economy New Keynesian Phillips Curve: Evidence From Hong Kong," Pacific Economic Review, Wiley Blackwell, vol. 10(2), pages 261-277, 06.
  7. James Yetman, 2009. "Hong Kong Consumer Prices are Flexible," Working Papers 052009, Hong Kong Institute for Monetary Research.
  8. Thomas Lubik & Frank Schorfheide, 2005. "A Bayesian Look at New Open Economy Macroeconomics," Economics Working Paper Archive 521, The Johns Hopkins University,Department of Economics.
  9. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, 09.
  10. Frank Leung & Gaofeng Han & Kevin Chow, 2009. "Financial Services Sector as a Driver of Productivity Growth in Hong Kong," Working Papers 0914, Hong Kong Monetary Authority.
  11. Paul D. McNelis, 2009. "Structural Change and Counterfactual Inflation-Targeting in Hong Kong," Working Papers 232009, Hong Kong Institute for Monetary Research.
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