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Recent Performance Of The Hong Kong Dollar Linked Exchange Rate System

Author

Listed:
  • 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.

Suggested Citation

  • 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.
  • Handle: RePEc:pra:mprapa:9440
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    File URL: https://mpra.ub.uni-muenchen.de/9440/1/MPRA_paper_9440.pdf
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    References listed on IDEAS

    as
    1. Frank Leung, 2006. "Structural Determinants of Hong Kong's Current Account Surplus," Working Papers 0614, Hong Kong Monetary Authority.
    2. 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.
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    Citations

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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," BOFIT Discussion Papers 21/2009, Bank of Finland, Institute for Economies in Transition.
    2. 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.
    3. 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.
    4. Hong Kong Monetary Authority, 2013. "Monetary operations under the Currency Board system: the experience of Hong Kong," BIS Papers chapters, in: Bank for International Settlements (ed.),Sovereign risk: a world without risk-free assets?, volume 73, pages 145-154, Bank for International Settlements.
    5. Ledenyov, Dimitri O. & Ledenyov, Viktor O., 2015. "Wave function method to forecast foreign currencies exchange rates at ultra high frequency electronic trading in foreign currencies exchange markets," MPRA Paper 67470, University Library of Munich, Germany.

    More about this item

    Keywords

    Hong Kong dollar linked exchange rate system;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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