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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 Operation of the New Exchange Rate Mechanism

The Operation of the New Exchange Rate Mechanism

January–February 1984

Chapter:
(p.168) (p.169) Chapter 7 The Operation of the New Exchange Rate Mechanism
Source:
Hong Kong's Link to the US Dollar
Author(s):

John Greenwood

Publisher:
Hong Kong University Press
DOI:10.5790/hongkong/9789622098909.003.0008

By late January 1984, three months from the implementation of the new currency board in October 1983, the linked rate system for the Hong Kong dollar had settled down and appeared to outsiders to be working tolerably well. This chapter explains why the system is so resilient, and examines the operation of the scheme with respect to the behaviour of interest rates in the Hong Kong dollar money market, the behaviour of the money supply since the implementation of the new scheme, and the likely behaviour of the monetary and other nominal variables under alternative assumptions about the real economy. It also examines some possible scenarios for the longer-term adjustment of the Hong Kong economy under a currency board.

Keywords:   currency board, linked rate system, Hong Kong dollar, interest rates, money supply

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