Is the Hong Kong Dollar Exchange Rate "Bounded" in the Convertibility Zone?
The empirical results show that after the introduction of the three refinements to the Linked Exchange Rate system in May 2005 the Hong Kong dollar follows a bounded process that is consistent with a fully credible exchange rate band. The bounded process will limit the movements of the exchange rate to between the strong- and weak-side limits because its variance vanishes at the Convertibility Undertakings making it inaccessible to the limits. The Hong Kong dollar does not show any strong tendency to revert towards the centre of the Convertibility Zone. This is perhaps not surprising as there have been no interventions in the foreign exchange market since May 2005. There may be few forces or incentives for market participants to drive the exchange rate towards 7.80.
|Date of creation:||Sep 2007|
|Contact details of provider:|| Postal: 55th Floor, Two International Finance Centre, 8 Finance Street, Central|
Web page: http://www.info.gov.hk/hkma/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:hkg:wpaper:0713. 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: (Simon Chan)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.