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Deflation in Hong Kong SAR

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  • Philip Schellekens
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    Abstract

    This paper examines the causes of deflation in Hong Kong SAR, exploring whether it reflects a prolonged process of adjustment to cyclical shocks or whether it results from price equalization pressures arising from structural integration with mainland China. To gauge the relative importance of these factors, the paper provides both an econometric and a qualitative analysis of the price dynamics between Hong Kong SAR and Shenzhen, a neighboring city in mainland China. It finds that the role of price equalization as a source of deflation is minor. Deflation in Hong Kong SAR is best explained by successive cyclical shocks which have been amplified by balance-sheet and wealth effects.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=16392
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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/77.

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    Length: 26
    Date of creation: 01 Apr 2003
    Date of revision:
    Handle: RePEc:imf:imfwpa:03/77

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    Related research

    Keywords: Hong Kong SAR; Price stabilization; inflation; price level; monetary fund; monetary authority; hong kong monetary authority; monetary policy; inflation rates; stable prices; price deflation; real interest rates; monetary research; inflation rate; real wages; central bank; price inflation; deflationary shock;

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    1. Christoph Duenwald, 2000. "Property Prices and Speculative Bubbles," IMF Working Papers 00/2, International Monetary Fund.
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    Cited by:
    1. Mehrotra, Aaron N., 2007. "Exchange and interest rate channels during a deflationary era--Evidence from Japan, Hong Kong and China," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 188-210, March.
    2. Hans Genberg, 2005. "External shocks, transmission mechanisms and deflation in Asia," BIS Working Papers 187, Bank for International Settlements.

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