A soft edge target zone model: theory and application to Hong Kong

Yu-Fu Chen, Michael Funke, Nicole Glanemann

    Research output: Working paperDiscussion paper

    Abstract

    Hong Kong’s currency is pegged to the US dollar in a currency board arrangement. In autumn 2003,the Hong Kong dollar appreciated from close to 7.80 per US dollar to 7.70, as investors feared that the currency board would be abandoned. In the wake of this appreciation, the monetary authorities revamped the one-sided currency board mechanism into a symmetric two-sided system with a narrow exchange rate band. This paper reviews the characteristics of the new currency board arrangement and embeds a theoretical soft edge target zone model typifying many intermediate regimes, to explain the notable achievement of speculative peace and credibility since May 2005.
    Original languageEnglish
    Place of PublicationFinland
    PublisherBank of Finland
    ISBN (Print)9789524629973
    Publication statusPublished - 2009

    Publication series

    NameBOFIT Discussion Papers
    PublisherBank of Finland
    No.21/2009
    ISSN (Print)1456-4564
    ISSN (Electronic)1456-5889

    Fingerprint

    Currency board
    Target zones
    Hong Kong
    Authority
    Investors
    Peace
    Credibility
    Exchange rates
    Currency

    Keywords

    • Currency Board Arrangement
    • Target zone model
    • Credibility
    • Hong Kong

    Cite this

    Chen, Y-F., Funke, M., & Glanemann, N. (2009). A soft edge target zone model: theory and application to Hong Kong. (BOFIT Discussion Papers; No. 21/2009). Finland: Bank of Finland.
    Chen, Yu-Fu ; Funke, Michael ; Glanemann, Nicole. / A soft edge target zone model : theory and application to Hong Kong. Finland : Bank of Finland, 2009. (BOFIT Discussion Papers; 21/2009).
    @techreport{2f2cac5a9ab4417fa93de4d8c6aa11d8,
    title = "A soft edge target zone model: theory and application to Hong Kong",
    abstract = "Hong Kong’s currency is pegged to the US dollar in a currency board arrangement. In autumn 2003,the Hong Kong dollar appreciated from close to 7.80 per US dollar to 7.70, as investors feared that the currency board would be abandoned. In the wake of this appreciation, the monetary authorities revamped the one-sided currency board mechanism into a symmetric two-sided system with a narrow exchange rate band. This paper reviews the characteristics of the new currency board arrangement and embeds a theoretical soft edge target zone model typifying many intermediate regimes, to explain the notable achievement of speculative peace and credibility since May 2005.",
    keywords = "Currency Board Arrangement, Target zone model, Credibility, Hong Kong",
    author = "Yu-Fu Chen and Michael Funke and Nicole Glanemann",
    year = "2009",
    language = "English",
    isbn = "9789524629973",
    series = "BOFIT Discussion Papers",
    publisher = "Bank of Finland",
    number = "21/2009",
    type = "WorkingPaper",
    institution = "Bank of Finland",

    }

    Chen, Y-F, Funke, M & Glanemann, N 2009 'A soft edge target zone model: theory and application to Hong Kong' BOFIT Discussion Papers, no. 21/2009, Bank of Finland, Finland.

    A soft edge target zone model : theory and application to Hong Kong. / Chen, Yu-Fu; Funke, Michael; Glanemann, Nicole.

    Finland : Bank of Finland, 2009. (BOFIT Discussion Papers; No. 21/2009).

    Research output: Working paperDiscussion paper

    TY - UNPB

    T1 - A soft edge target zone model

    T2 - theory and application to Hong Kong

    AU - Chen, Yu-Fu

    AU - Funke, Michael

    AU - Glanemann, Nicole

    PY - 2009

    Y1 - 2009

    N2 - Hong Kong’s currency is pegged to the US dollar in a currency board arrangement. In autumn 2003,the Hong Kong dollar appreciated from close to 7.80 per US dollar to 7.70, as investors feared that the currency board would be abandoned. In the wake of this appreciation, the monetary authorities revamped the one-sided currency board mechanism into a symmetric two-sided system with a narrow exchange rate band. This paper reviews the characteristics of the new currency board arrangement and embeds a theoretical soft edge target zone model typifying many intermediate regimes, to explain the notable achievement of speculative peace and credibility since May 2005.

    AB - Hong Kong’s currency is pegged to the US dollar in a currency board arrangement. In autumn 2003,the Hong Kong dollar appreciated from close to 7.80 per US dollar to 7.70, as investors feared that the currency board would be abandoned. In the wake of this appreciation, the monetary authorities revamped the one-sided currency board mechanism into a symmetric two-sided system with a narrow exchange rate band. This paper reviews the characteristics of the new currency board arrangement and embeds a theoretical soft edge target zone model typifying many intermediate regimes, to explain the notable achievement of speculative peace and credibility since May 2005.

    KW - Currency Board Arrangement

    KW - Target zone model

    KW - Credibility

    KW - Hong Kong

    M3 - Discussion paper

    SN - 9789524629973

    T3 - BOFIT Discussion Papers

    BT - A soft edge target zone model

    PB - Bank of Finland

    CY - Finland

    ER -

    Chen Y-F, Funke M, Glanemann N. A soft edge target zone model: theory and application to Hong Kong. Finland: Bank of Finland. 2009. (BOFIT Discussion Papers; 21/2009).