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The Hong Kong Linked Rate Mechanism: Monetary Lessons for Economic Development

Author

Listed:
  • Culp, Christopher

    (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)

  • Hanke, Steve

    (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)

  • Greenwood, John

    (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)

Abstract

A currency board is a monetary institution that issues notes and coins which are fully convertible into a reserve currency at a fixed rate on demand. Reserves are equal to 100 per cent, or slightly more, of a board’s notes and coins. There have been over seventy currency boards and all have maintained convertibility, even during civil wars. Although successful, currency boards fell victim to changing economic fashions, and most were replaced by central banks after World War II. Hong Kong has one of the few remaining currency board systems, although that system remains largely unknown, even to monetary specialists. An analysis of the evolution and working of Hong Kong’s system is presented in this text. Strengths and weaknesses of the current system are discussed, and measures to correct weaknesses are suggested. The desirability of the currency board system for developing countries, particularly those making the transformation from socialism to capitalism, is also examined.

Suggested Citation

  • Culp, Christopher & Hanke, Steve & Greenwood, John, 2013. "The Hong Kong Linked Rate Mechanism: Monetary Lessons for Economic Development," Studies in Applied Economics 6, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise, revised Jun 2013.
    • Handle: RePEc:ris:jhisae:0006
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    File URL: https://sites.krieger.jhu.edu/iae/files/2017/04/The-Hong-Kong-Working-Paper-Final.pdf
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    Cited by:

    1. Qiu, Yujuan, 2017. "Financial Deepening and Economic Growth in Select Emerging Markets with Currency Board Systems: Theory and Evidence," Studies in Applied Economics 87, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.

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