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The Choice Between Flexible Exchange Rates, Capital Control and the Currency Board in Asian Countries: A Perspective from the “Impossible Trinity”

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  • Koichi Hamada
  • Yosuke Takeda

Abstract

We attempt to compare adjustment costs under exchange rate regimes in East Asian economies during their recovery processes. The criteria are the degree of overshooting in exchange rates, the changes in country risks, and the severity and duration of the recovery processes. Linear ranking is difficult. Managed rates with capital control worked for macroeconomic performance despite the welfare loss due to blocking capital flows. The currency board system worked well for stability, but recent experiences of Argentina and Hong Kong were deflationary. Under flexible rates, many economies that received IMF grants suffered a drastic initial downturn but later recovered vigorously. JEL Classification Numbers: F31, F32, F33.

Suggested Citation

  • Koichi Hamada & Yosuke Takeda, 2001. "The Choice Between Flexible Exchange Rates, Capital Control and the Currency Board in Asian Countries: A Perspective from the “Impossible Trinity”," The Japanese Economic Review, Japanese Economic Association, vol. 52(4), pages 429-451, December.
    • Handle: RePEc:bla:jecrev:v:52:y:2001:i:4:p:429-451
    DOI: 10.1111/1468-5876.00205
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    Cited by:

    1. Asa Malmstrom Rognes & Catherine R. Schenk, 2023. "One country, two currencies: The adoption of the Hong Kong currency board, 1983," Economic History Review, Economic History Society, vol. 76(2), pages 477-497, May.
    2. Kwo Ping Tam, 2016. "A New Comparative Study On The Free-Floating And Currency Board Regimes In Hong Kong," Bulletin of Economic Research, Wiley Blackwell, vol. 68(3), pages 218-238, April.

    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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