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A Tale of Two Currencies: the Asian Crisis and the Exchange Rate Regimes of Hong Kong and Singapore

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  • Michael B. Devereux

Abstract

Hong Kong has maintained a pegged exchange rate since 1983, while Singapore has been on a floating regime since the early 1970s. This paper provides an interpretation of the different performance of the Hong Kong and Singapore economy that could be attributable to the differences in their exchange rate regime. We develop a model that can help to interpret the differences in both the longer run trends in inflation and real exchange rates in Hong Kong and Singapore as well as the short differences in macroeconomic and real exchange rate volatility. The difference in the response of the two economies to the Asian crisis is also consistent with our model.

Suggested Citation

  • Michael B. Devereux, 2003. "A Tale of Two Currencies: the Asian Crisis and the Exchange Rate Regimes of Hong Kong and Singapore," Review of International Economics, Wiley Blackwell, vol. 11(1), pages 38-54, February.
    • Handle: RePEc:bla:reviec:v:11:y:2003:i:1:p:38-54
    DOI: 10.1111/1467-9396.00367
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    Cited by:

    1. repec:zbw:bofrdp:2012_001 is not listed on IDEAS
    2. Naoyuki Yoshino & Sahoko Kaji & Tamon Asonuma, 2016. "Dynamic Effects of Changes in the Exchange Rate System," Asian Development Review, MIT Press, vol. 33(1), pages 111-161, March.
    3. Chan, Leo & Lien, Donald & Weng, Wenlong, 2008. "Financial interdependence between Hong Kong and the US: A band spectrum approach," International Review of Economics & Finance, Elsevier, vol. 17(4), pages 507-516, October.
    4. Bennett T. McCallum, 2007. "Monetary Policy in East Asia: The Case of Singapore," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 25(S1), pages 13-28, December.
    5. Ghironi, Fabio, 2008. "The role of net foreign assets in a New Keynesian small open economy model," Journal of Economic Dynamics and Control, Elsevier, vol. 32(6), pages 1780-1811, June.
    6. Yoshino, Naoyuki & Kaji, Sahoko & Asonuma, Tamon, 2014. "Dynamic Analysis of Exchange Rate Regimes: Policy Implications for Emerging Countries in Asia," ADBI Working Papers 502, Asian Development Bank Institute.
    7. Stefan Gerlach & Petra Gerlach-Kristen, 2006. "Monetary policy regimes and macroeconomic outcomes: Hong Kong and Singapore," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in Asia: approaches and implementation, volume 31, pages 40-64, Bank for International Settlements.
    8. Chow, Hwee Kwan & Lim, G.C. & McNelis, Paul D., 2014. "Monetary regime choice in Singapore: Would a Taylor rule outperform exchange-rate management?," Journal of Asian Economics, Elsevier, vol. 30(C), pages 63-81.
    9. Muhammad Khan & Nikolay Nenovsky, 2017. "Monetary Regimes and External Shocks Reaction: Empirical Investigations on Eastern European Economies," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 20(66), pages 63-81, December.
    10. Punzi, Maria Teresa, 2012. "Housing market and current account imbalances in the international economy," Bank of Finland Research Discussion Papers 1/2012, Bank of Finland.
    11. Chang, Kuang-Liang & Chen, Nan-Kuang & Leung, Charles Ka Yui, 2012. "The dynamics of housing returns in Singapore: How important are the international transmission mechanisms?," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 516-530.
    12. Maria Teresa Punzi, 2013. "Housing Market and Current Account Imbalances in the International Economy," Review of International Economics, Wiley Blackwell, vol. 21(4), pages 601-613, September.
    13. Busse, Matthias & Hefeker, Carsten & Koopmann, Georg, 2006. "Between two poles: A dual currency board for Mercosur," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 349-362, December.
    14. Ghironi, Fabio, 2006. "Macroeconomic interdependence under incomplete markets," Journal of International Economics, Elsevier, vol. 70(2), pages 428-450, December.
    15. Hwee Kwan Chow & Paul D. McNelis, 2010. "Need Singapore Fear Floating? A DSGE-VAR Approach," Working Papers 29-2010, Singapore Management University, School of Economics.
    16. Frederik Kunze, 2020. "Predicting exchange rates in Asia: New insights on the accuracy of survey forecasts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(2), pages 313-333, March.
    17. Kunze, Frederik, 2017. "Predicting exchange rates in Asia: New insights on the accuracy of survey forecasts," University of Göttingen Working Papers in Economics 326, University of Goettingen, Department of Economics.
    18. Hiroyuki IMAI, 2010. "Hong Kong'S Inflation And Deflation Under The Us Dollar Peg: The Balassa‐Samuelson Effect Or Export Price Shocks?," The Developing Economies, Institute of Developing Economies, vol. 48(3), pages 319-344, September.
    19. Quah Chee-Heong, 2019. "China’s Dollar-linked Hong Kong during the Global Crisis," Apuntes del Cenes, Universidad Pedagógica y Tecnológica de Colombia, vol. 38(67), pages 95-121, February.

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