A soft target zone model: Theory and application to Hong Kong
Hong Kong's currency is pegged to the US dollar in a currency board arrangement. In autumn 2003, the Hong Kong dollar appreciated from close to 7.80 per US dollar to 7.70, as investors feared that the currency board would be abandoned. In the wake of this appreciation, the monetary authorities revamped the one-sided currency board mechanism into a symmetric two-sided system with a narrow exchange rate band. This paper reviews the characteristics of the new currency board arrangement and embeds a theoretical soft edge target zone model typifying many intermediate regimes, to explain the notable achievement of speculative peace and credibility since May 2005.
|Date of creation:||Dec 2009|
|Date of revision:|
|Contact details of provider:|| Postal: Von-Melle-Park 5 D-20146 Hamburg|
Phone: : +49 (0)40 42838-4674
Fax: +49 (0)40 42838-5546
Web page: http://www.uni-hamburg.de/onTEAM/grafik/1223630633/RePec/ham
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fung, Hung-Gay & LEUNG, Wai K. & Zhu, Jiang, 2004. "Nondeliverable forward market for Chinese RMB: A first look," China Economic Review, Elsevier, vol. 15(3), pages 348-352.
- Bartolini, Leonardo & Prati, Alessandro, 1999.
"Soft exchange rate bands and speculative attacks: theory, and evidence from the ERM since August 1993,"
Journal of International Economics,
Elsevier, vol. 49(1), pages 1-29, October.
- Leonardo Bartolini & Alessandro Prati, 1998. "Soft Exchange Rate Bands and Speculative Attacks; Theory, and Evidence from the ERM since August 1993," IMF Working Papers 98/156, International Monetary Fund.
- Leonardo Bartolini & Alessandro Prati, 1998. "Soft exchange rate bands and speculative attacks: theory and evidence from the ERM since August 1993," Staff Reports 43, Federal Reserve Bank of New York.
- Dibeh, Ghassan, 2006. "Target zone dynamics where the fundamental follows a SDE with periodic forcing," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 363(2), pages 437-445.
- Genberg, Hans & He, Dong & Leung, Frank, 2007. "Recent Performance Of The Hong Kong Dollar Linked Exchange Rate System," MPRA Paper 9440, University Library of Munich, Germany.
- Schmukler, Sergio L. & Serven, Luis, 2002. "Pricing currency risk under currency boards," Journal of Development Economics, Elsevier, vol. 69(2), pages 367-391, December.
- Guy Debelle & Jacob Gyntelberg & Michael Plumb, 2006. "Forward currency markets in Asia: lessons from the Australian experience," BIS Quarterly Review, Bank for International Settlements, September.
- Leonardo Bartolini & Alessandro Prati, 1997. "Soft versus hard targets for exchange rate intervention," Economic Policy, CEPR;CES;MSH, vol. 12(24), pages 13-52, 04.
- Guonan Ma & Corrinne Ho & Robert N McCauley, 2004. "The markets for non-deliverable forwards in Asian currencies," BIS Quarterly Review, Bank for International Settlements, June.
- Labhard, Vincent & Wyplosz, Charles, 1996. "The New EMS: Narrow Bands inside Deep Bands," American Economic Review, American Economic Association, vol. 86(2), pages 143-46, May.
When requesting a correction, please mention this item's handle: RePEc:ham:qmwops:20912. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.