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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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The Stabilisation of the Hong Kong Dollar

The Stabilisation of the Hong Kong Dollar

November–December 1983

(p.136) (p.137) Chapter 6 The Stabilisation of the Hong Kong Dollar
Hong Kong's Link to the US Dollar

John Greenwood

Hong Kong University Press

This chapter looks back on how the Hong Kong dollar was stabilised in October 1983. It presents a combination of theoretical discussion and historical narrative of the events between late September and mid-October when the new scheme was adopted. It examines why the “interest rate weapon” failed, and discusses some of the international political events (the Sino-British negotiations over the future of Hong Kong) and local dramas (the run on the supermarkets) that formed the background to the currency crisis. It also discusses important issues in currency stabilisation such as the choice of monetary standard, whether to adopt partial or full convertibility of HKD banknotes to USD at the fixed rate, the choice of currency, and the choice of exchange rate. It also outlines the institutional arrangements of the new scheme, anticipating some of the later discussion of the cash arbitrage process.

Keywords:   Hong Kong dollar, interest rate, Sino-British negotiations, currency stabilisation, stabilisation, monetary standard, HKD banknotes, exchange rate, cash arbitrage

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