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Diversity and Occasional AnarchyOn Deep Economic and Social Contradictions in Hong Kong$
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Yue Chim Richard Wong

Print publication date: 2013

Print ISBN-13: 9789888139446

Published to Hong Kong Scholarship Online: January 2014

DOI: 10.5790/hongkong/9789888139446.001.0001

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External Shocks and Price Stability under the Linked Rate

External Shocks and Price Stability under the Linked Rate

(p.51) 4 External Shocks and Price Stability under the Linked Rate
Diversity and Occasional Anarchy

Yue Chim Richard Wong

Hong Kong University Press

The Hong Kong dollar was fixed against the pound sterling until June 1972. Since 1983, it has been fixed against the US dollar. The linked exchange rate connects Hong Kong with the international economy, and provides an anchor which maintains the community's faith in the currency and people's confidence in the government's management of monetary policy. However, the linked exchange rate also narrows the policy options available to the authorities to withstand external shocks. The opening of China, the Asian financial crisis and the global financial tsunami placed conflicting requirements on the direction of price adjustments. The public and quasi-public sector have not adjusted well in response to these events, and the property wealth has become more unevenly distributed. The domestic economy and its numerous sectors therefore have to possess a higher degree of flexibility and agility in an attempt to accommodate and absorb the external impacts.

Keywords:   Linked exchange rate, Price stability, External shocks, Monetary policy, Domestic economy, Hong Kong, Property, China, Economy, Policies

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