Title

A comparative study of exchange rate regimes and macro-instabilities in the twin economies of Singapore and Hong Kong

Document Type

Journal article

Source Publication

Singapore Economic Review

Publication Date

4-1-2007

Volume

52

Issue

1

First Page

93

Last Page

116

Keywords

Basket-link, Currency board, Hong Kong, Singapore

Abstract

Based on a small, open-economy IS-LM prototype model, this paper examines the sources of macroeconomic instabilities in Hong Kong and Singapore operating under two different currency board arrangements. The empirical findings suggest that in general, both external and internal factors contribute to the macroeconomic volatilities observed in the two economies. There is evidence of a tradeoff between exchange rate and interest rate targeting for the stability of money supply in Singapore. Our findings have important implications for Mainland China's monetary authorities in the transition from a hard-peg exchange rate regime like Hong Kong to a basket-link system like the one in Singapore.

DOI

10.1142/S0217590807002580

Print ISSN

02175908

Funding Information

This research was supported in part by a Competitive Earmarked Research Grant (No. LU3110/03H) from the RGC of Hong Kong SAR Government, and a research grant from Lingnan University, Hong Kong (No. DR06A3). {LU3110/03H, DR06A3}

Publisher Statement

Copyright © 2007 World Scientific Publishing Company. Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Language

English

Recommended Citation

Ma, Y., Kueh, Y. Y., & Ng, R. C. W. (2007). A comparative study of exchange rate regimes and macro-instabilities in the twin economies of Singapore and Hong Kong. Singapore Economic Review, 52(1), 93-116. doi: 10.1142/S0217590807002580

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