Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212674 
Year of Publication: 
2010
Series/Report no.: 
BOFIT Discussion Papers No. 6/2010
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
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.
Subjects: 
Currency Board Arrangement
Target Zone Model
Hong Kong
JEL: 
C61
E42
F31
F32
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-681-1
Document Type: 
Working Paper

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