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Hong Kong's Link to the US DollarOrigins and Evolution$
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John Greenwood

Print publication date: 2007

Print ISBN-13: 9789622098909

Published to Hong Kong Scholarship Online: September 2011

DOI: 10.5790/hongkong/9789622098909.001.0001

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Hong Kong's Financial Crisis Hong Kong's Financial Crisis History, Analysis, Prescription

Hong Kong's Financial Crisis Hong Kong's Financial Crisis History, Analysis, Prescription

(November–December 1982)

Chapter:
(p.51) Chapter 4 Hong Kong's Financial Crisis History, Analysis, Prescription
Source:
Hong Kong's Link to the US Dollar
Author(s):

John Greenwood

Publisher:
Hong Kong University Press
DOI:10.5790/hongkong/9789622098909.003.0005

This chapter analyzes Hong Kong's monetary problems and the growing problem of inflation since 1974. It argues that the Hong Kong government could not stop the currency slide through intervention in the foreign exchange markets because the government had been treating the symptoms of monetary and financial problems, instead of dealing with the underlying causes. It begins by discussing the four major instruments of monetary policy (liquid assets, interest rates, government borrowing scheme, intervention in foreign exchange policy) and explains why each of them did not work. It concludes by reviewing the two key proposals for reforming the monetary system — either to control the quantity of money by converting the Exchange Fund, Hong Kong's monetary authority, into a central bank, or to manage the exchange rate with a central bank or modified Exchange Fund.

Keywords:   inflation, currency slide, foreign exchange markets, liquid assets, interest rates, government borrowing scheme, foreign exchange policy, Exchange Fund, central bank

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