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Volatility of fundamental variables under different exchange rate system--a simple test for Hong Kong

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  • Jimmy Ran

Abstract

This paper presents a comparison in the changes of Hong Kong macroeconomic fundamental variables before and after its currency was 'pegged' to the US dollar in October 1983. Using a simple method from Flood and Rose (1995) and Baxter and Stockman (1989), this paper compares the volatilities of all aggregate variables used by those investigators in so far as these data are available for Hong Kong. The results show, contrary to the dominating empirical literature for the G-7 countries, that the volatilities of more than half of the nominal and real variables under the float are significantly higher than those under the link.

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  • Jimmy Ran, 2002. "Volatility of fundamental variables under different exchange rate system--a simple test for Hong Kong," Applied Economics, Taylor & Francis Journals, vol. 34(2), pages 253-258.
    • Handle: RePEc:taf:applec:v:34:y:2002:i:2:p:253-258
    DOI: 10.1080/00036840110036288
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    References listed on IDEAS

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    1. Flood, Robert P. & Rose, Andrew K., 1995. "Fixing exchange rates A virtual quest for fundamentals," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 3-37, August.
    2. Baxter, Marianne & Stockman, Alan C., 1989. "Business cycles and the exchange-rate regime : Some international evidence," Journal of Monetary Economics, Elsevier, vol. 23(3), pages 377-400, May.
    3. Rose, Andrew K, 1996. "After the Deluge: Do Fixed Exchange Rates Allow Inter-temporal Volatility Tradeoffs?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 1(1), pages 47-54, January.
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    Cited by:

    1. Hui-Boon Tan & Lee-Lee Chong, 2008. "Choice of exchange rate system and macroeconomic volatility of three Asian emerging economies," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 1(2), pages 167-179.
    2. Saadet Kasman & Duygu Ayhan, 2006. "Macroeconomic Volatility under Alternative Exchange Rate Regimes in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 6(2), pages 37-58.

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