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Recent Performance Of The Hong Kong Dollar Linked Exchange Rate System

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Author Info

  • Genberg, Hans
  • He, Dong
  • Leung, Frank

Abstract

This paper reviews the performance of the Hong Kong dollar Linked Exchange Rate system since the introduction of the three refinements to it in May 2005. It presents an analytical framework which argues that, in a fully credible exchange rate target zone regime, the spot exchange rate normally stays inside the band but does not have a natural tendency to converge towards the centre of the zone. While a certain level of interest rate differential between the Hong Kong dollar and the US dollar may persist, it should not grow significantly larger than what is implied by the width of the Convertibility Zone. Judged against this framework, the developments since May 2005 point to increased credibility of the refined Linked Exchange Rate system.

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File URL: http://mpra.ub.uni-muenchen.de/9440/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9440.

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Date of creation: Jun 2007
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Handle: RePEc:pra:mprapa:9440

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Keywords: Hong Kong dollar linked exchange rate system;

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References

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  1. Hans Genberg & Li-gang Liu & Xiangrong Jin, 2006. "Hong Kong's Economic Integration and Business Cycle Synchronisation with Mainland China and the US," Working Papers 0611, Hong Kong Monetary Authority.
  2. Frank Leung, 2006. "Structural Determinants of Hong Kong's Current Account Surplus," Working Papers 0614, Hong Kong Monetary Authority.
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Cited by:
  1. 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).
  2. Michael Funke & Yu-Fu Chen & Nicole Glanemann, 2009. "A soft target zone model: Theory and application to Hong Kong," Quantitative Macroeconomics Working Papers 20912, Hamburg University, Department of Economics.
  3. Dong He & Zhiwei Zhang & Honglin Wang, 2009. "Hong Kong's Financial Market Interactions with the US and Mainland China in Crisis and Tranquil Times," Working Papers 0910, Hong Kong Monetary Authority.

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