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