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A Model to Analyze the Macroeconomic Interdependence of Hong Kong with China and the United States

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  • Fuchun Jin

    (Hong Kong Institute for Monetary Research and China Center for Economic Research, Peking University)

Abstract

Based on several stylized facts, this paper develops a macroeconomic model for Hong Kong that emphasizes its interdependence with China and the United States. Important macroeconomic variables such as the price level and nominal wage rate, as well as capital flow, are analyzed first in a static setting and then in a dynamic model. As an application, the model is used to analyze macroeconomic adjustment of Hong Kong in response to economic slowdown in the U.S. and a possible devaluation of the RMB. Theoretical results are obtained both under the assumption of adaptive and rational expectations.

Suggested Citation

  • Fuchun Jin, 2002. "A Model to Analyze the Macroeconomic Interdependence of Hong Kong with China and the United States," Working Papers 062002, Hong Kong Institute for Monetary Research.
    • Handle: RePEc:hkm:wpaper:062002
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    References listed on IDEAS

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    1. Buiter, Willem H & Miller, Marcus, 1981. "Monetary Policy and International Competitiveness: The Problems of Adjustment," Oxford Economic Papers, Oxford University Press, vol. 33(0), pages 143-175, Supplemen.
    2. Robert A. Mundell, 1962. "The Appropriate Use of Monetary and Fiscal Policy for Internal and External Stability," IMF Staff Papers, Palgrave Macmillan, vol. 9(1), pages 70-79, March.
    3. Luis A. Rivera-Batiz & Amadou N. R. Sy, 2013. "Currency Boards, Credibility, and Macroeconomic Behavior," Annals of Economics and Finance, Society for AEF, vol. 14(2), pages 831-870, November.
    4. Shu-Ki Tsang & Shu-Hung Tang, 1998. "The Impact of the China Factor on the pre-1997 Hong Kong Economy: a macroeconometric analysis," International Review of Applied Economics, Taylor & Francis Journals, vol. 12(1), pages 89-106.
    5. Kenen, Peter B., 1985. "Macroeconomic theory and policy: How the closed economy was opened," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 13, pages 625-677, Elsevier.
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    Cited by:

    1. Funke, Michael & Paetz, Michael & Pytlarczyk, Ernest, 2011. "Stock market wealth effects in an estimated DSGE model for Hong Kong," Economic Modelling, Elsevier, vol. 28(1-2), pages 316-334, January.
    2. repec:zbw:bofitp:2009_014 is not listed on IDEAS
    3. Funke, Michael & Paetz, Michael & Pytlarczyk, Ernest, 2011. "Stock market wealth effects in an estimated DSGE model for Hong Kong," Economic Modelling, Elsevier, vol. 28(1-2), pages 316-334, January.

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