IDEAS home Printed from https://ideas.repec.org/a/wsi/rpbfmp/v08y2005i03ns021909150500049x.html
   My bibliography  Save this article

On the Maintenance Costs and Exit Costs of the Peg in Hong Kong

Author

Listed:
  • Paul S. L. Yip

    (Economics Department, School of Humanities and Social Sciences, Nanyang Technological University, Nanyang Avenue, Singapore 639798, Singapore)

Abstract

This paper attempts to pioneer a discussion on the exit and maintenance costs of the Currency Board System (CBS) in Hong Kong, and hopes to invite more debate on the issue. It suggests that the exit costs will depend on the timing of an exit, whether there are supplementary packages to mitigate the exit costs, and the choice of an alternative exchange rate system. In particular, it suggests that the monitoring band system favored by Williamson (2000) could help to reduce the exit costs. In addition, the paper points out that there are ways to reduce both the exit and maintenance costs. It then proposes a reform that could benefit the economy regardless of whether the policy maker eventually chooses to continue with or abandon the peg. The study is not only crucial to Hong Kong, but also important to other economies with a CBS as well as to the debate on the choice of exchange rate system.

Suggested Citation

  • Paul S. L. Yip, 2005. "On the Maintenance Costs and Exit Costs of the Peg in Hong Kong," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 8(03), pages 377-403.
    • Handle: RePEc:wsi:rpbfmp:v:08:y:2005:i:03:n:s021909150500049x
    DOI: 10.1142/S021909150500049X
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S021909150500049X
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S021909150500049X?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yum K. Kwan & Francis Lui, 1999. "Hong Kong's Currency Board and Changing Monetary Regimes," NBER Chapters, in: Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues, pages 403-436, National Bureau of Economic Research, Inc.
    2. Miller, Marcus & corrado, luisa, 2002. "Exchange Rate Monitoring Bands: Theory and Policy," CEPR Discussion Papers 3337, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:zbw:bofitp:1999_009 is not listed on IDEAS
    2. Luisa Corrado & Marcus Miller & Lei Zhang, 2007. "Bulls, bears and excess volatility: can currency intervention help?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 261-272.
    3. Sarkis Joseph Khoury & Clas Wihlborg, 2006. "Outsourcing Central Banking: Lessons from Estonia," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 9(2), pages 125-144.
    4. Raoul Lättemäe, 2001. "Monetary transmission mechanism in Estonia - some theorethical considerations and stylized aspects," Bank of Estonia Working Papers 2001-4, Bank of Estonia, revised 13 Oct 2001.
    5. Tse, Y.K. & Yip, Paul S.L., 2006. "Exchange-rate systems and interest-rate behaviour: The experience of Hong Kong and Singapore," International Review of Economics & Finance, Elsevier, vol. 15(2), pages 212-227.
    6. Richard W. Kopcke, 1999. "Currency boards: once and future monetary regimes?," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 21-37.
    7. Rasmus Kattai, 2004. "Analyzing the Suitability of the Currency Board Arrangement for Estonia’s Accession to the EMU," University of Tartu - Faculty of Economics and Business Administration, in: Modelling the Economies of the Baltic Sea Region, volume 17, chapter 6, pages 167-205, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    8. Tse, Y. K. & Yip, Paul S. L., 2003. "The impacts of Hong Kong's Currency Board reforms on the interbank market," Journal of Banking & Finance, Elsevier, vol. 27(12), pages 2273-2296, December.
    9. G. Dufrenot & E. Grimaud & E. Latil & V. Mignon, 2003. "Real exchange rate misalignment in Hungary: a fractionally integrated threshold model," THEMA Working Papers 2003-07, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    10. Yin-Wong Cheung, 2000. "Hong Kong Output Dynamics: An Empirical Analysis," Working Papers 112000, Hong Kong Institute for Monetary Research.
    11. Iikka Korhonen, 2000. "Currency Boards in the Baltic Countries: What Have We Learned?," Post-Communist Economies, Taylor & Francis Journals, vol. 12(1), pages 25-46.
    12. Iikka Korhonen, 2000. "Currency Boards in the Baltic Countries: What Have We Learned?," Post-Communist Economies, Taylor & Francis Journals, vol. 12(1), pages 25-46.
    13. Malgorzata Jakubiak, 1999. "Design and Operation of Existing Currency Board Arrangements," CASE Network Studies and Analyses 0203, CASE-Center for Social and Economic Research.
    14. Sophie Chauvin, 2001. "Exit Options for Argentina with a Special Focus on Their Impact on External Trade," Working Papers 2001-07, CEPII research center.
    15. Schmukler, Sergio L. & Serven, Luis, 2002. "Pricing currency risk under currency boards," Journal of Development Economics, Elsevier, vol. 69(2), pages 367-391, December.
    16. Mart Sırg, 2005. "Estoniaís Accession to the EMU," Working Papers 133, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
    17. Gilles DUFRENOT & Elisabeth GRIMAUD & Eug=E9nie LATIL & Val=E9rie MIGNON, 2003. "Real exhange rate misalignment in Hungary: a fractionally integrated=20 threshold model," Econometrics 0309001, University Library of Munich, Germany.
    18. Christopher A. Sims, 2001. "Fiscal Aspects of Central Bank Independence," CESifo Working Paper Series 547, CESifo.
    19. Sergio L. Schmukler & Luis Serven, 2002. "Pricing Currency Risk: Facts and Puzzles from Currency Boards," NBER Working Papers 9047, National Bureau of Economic Research, Inc.
    20. Sõrg, Mart, 2004. "Estonian Monetary System: Reconstruction, Performance, and Future Prospects," Wirtschaftswissenschaftliche Diskussionspapiere 11/2004, University of Greifswald, Faculty of Law and Economics.
    21. Bronka Rzepkowski, 2000. "The Expectations of Hong Kong Dollar Devaluation and Their Determinants," Working Papers 2000-04, CEPII research center.

    More about this item

    Keywords

    Currency board; monitoring band; exchange rate policy; Hong Kong; Singapore; JEL Classifications: F41; JEL Classifications: E58;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:rpbfmp:v:08:y:2005:i:03:n:s021909150500049x. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/rpbfmp/rpbfmp.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.