Off-the-record target zones: theory with an application to Hong Kong’s Currency Board

Yu-Fu Chen; Michael Funke; Nicole Glanemann

doi:10.1515/snde-2012-0034

Off-the-record target zones: theory with an application to Hong Kong’s Currency Board

Yu-Fu Chen, Michael Funke, Nicole Glanemann

Research output: Working paper/Preprint › Discussion paper

4 Citations (Scopus)

324 Downloads (Pure)

Abstract

This paper provides a modelling framework for evaluating the exchange rate dynamics of a target zone regime with undisclosed bands. We generalize the literature to allow for asymmetric one-sided regimes. Market participants' beliefs concerning an undisclosed band change as they learn more about central bank intervention policy. We apply the model to Hong Kong's one-sided currency board mechanism. 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 finally revamped the regime as a symmetric two-sided system with a narrow exchange rate band.

Original language	English
Place of Publication	Helsinki
Publisher	Bank of Finland
Number of pages	31
ISBN (Electronic)	9789524626811
DOIs	https://doi.org/10.1515/snde-2012-0034
Publication status	Published - 2010

Publication series

Name	BOFIT Discussion Papers
Publisher	Bank of Finland Institute for Economies in Transition
No.	6
ISSN (Print)	1456-4564
ISSN (Electronic)	1456-5889

Keywords

Currency Board Arrangement
Target zone model
Hong Kong

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10.1515/snde-2012-0034

DP0610Final published version, 1.05 MB

4 Citations
1 Discussion paper

Dundee Discussion Papers in Economics 235: Off-the-record target zones: theory with an application to Hong Kong’s Currency Board
Chen, Y.-F., Funke, M. & Glanemann, N., 2010, University of Dundee, (Dundee Discussion Papers in Economics; no. 235).
Research output: Working paper/Preprint › Discussion paper

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Cite this

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Off-the-record target zones: theory with an application to Hong Kong’s Currency Board

Abstract

Publication series

Keywords

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Research output

Dundee Discussion Papers in Economics 235: Off-the-record target zones: theory with an application to Hong Kong’s Currency Board

Cite this