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The role of entrepOt trade in the choice of a nominal anchor for Hong Kong

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  • Kam-Ki Tang

Abstract

This paper adds a new perspective to the literature of monetary standard by establishing a link between re-exports and the choice of nominal anchor. The model developed is applied to address the controversy over the US dollar versus the renminbi as the nominal anchor for Hong Kong, in the context of its considerable amount of entrepOt trade with the US and China. It is found that the distinct trade structure of the US-Hong Kong-China triangle significantly reduces Hong Kong's opportunity cost of choosing between the two currencies, its nominal anchor.

Suggested Citation

  • Kam-Ki Tang, 2001. "The role of entrepOt trade in the choice of a nominal anchor for Hong Kong," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 11(2), pages 189-206.
    • Handle: RePEc:taf:jitecd:v:11:y:2001:i:2:p:189-206
    DOI: 10.1080/09638190010110749
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    References listed on IDEAS

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    1. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
    2. Argy, V. & Mckibbin, W. & Siegloff, E., 1989. "Exchange Rate Regimes For Small Economy In A Multi-Country World," Princeton Studies in International Economics 67, International Economics Section, Departement of Economics Princeton University,.
    3. Mr. Dubravko Mihaljek & Mr. John R Dodsworth, 1997. "Hong Kong, China: Growth, Structural Change, and Economic Stability During the Transition," IMF Occasional Papers 1997/004, International Monetary Fund.
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