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A Comparative Study Of Exchange Rate Regimes And Macro-Instabilities In The Twin Economies Of Singapore And Hong Kong

Author

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  • YUE MA

    (Economics Department, Lingnan University, Hong Kong, China;
    Macroeconomic Research Centre, Xiamen University, P R China)

  • Y. Y. KUEH

    (Faculty of Commerce, Chu Hai College of Higher Education, Hong Kong, China)

  • RAYMOND C. W. NG

    (School of Continuing Education, Hong Kong Baptist University, China)

Abstract

Based on a small, open-economy IS-LM prototype model, this paper examines the sources of macroeconomic instabilities in Hong Kong and Singapore operating under two different currency board arrangements. The empirical findings suggest that in general, both external and internal factors contribute to the macroeconomic volatilities observed in the two economies. There is evidence of a tradeoff between exchange rate and interest rate targeting for the stability of money supply in Singapore. Our findings have important implications for Mainland China's monetary authorities in the transition from a hard-peg exchange rate regime like Hong Kong to a basket-link system like the one in Singapore.

Suggested Citation

  • Yue Ma & Y. Y. Kueh & Raymond C. W. Ng, 2007. "A Comparative Study Of Exchange Rate Regimes And Macro-Instabilities In The Twin Economies Of Singapore And Hong Kong," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 52(01), pages 93-116.
    • Handle: RePEc:wsi:serxxx:v:52:y:2007:i:01:n:s0217590807002580
    DOI: 10.1142/S0217590807002580
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    References listed on IDEAS

    as
    1. Menzie D. Chinn & Guy Meredith, 2004. "Monetary Policy and Long-Horizon Uncovered Interest Parity," IMF Staff Papers, Palgrave Macmillan, vol. 51(3), pages 409-430, November.
    2. Mr. Guy M Meredith & Yue Ma, 2002. "The Forward Premium Puzzle Revisited," IMF Working Papers 2002/028, International Monetary Fund.
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    Cited by:

    1. Yue Ma, 2009. "External Shocks, Balance Sheet Contagion, and Speculative Attack on the Pegged Exchange Rate System," Review of Development Economics, Wiley Blackwell, vol. 13(1), pages 87-98, February.
    2. Kwo Ping Tam, 2016. "A New Comparative Study On The Free-Floating And Currency Board Regimes In Hong Kong," Bulletin of Economic Research, Wiley Blackwell, vol. 68(3), pages 218-238, April.

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