Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/250337 
Year of Publication: 
2021
Series/Report no.: 
Cardiff Economics Working Papers No. E2021/13
Publisher: 
Cardiff University, Cardiff Business School, Cardiff
Abstract: 
This paper studies the economy of Hong Kong through the lens of a small open economy DSGE model with a currency board exchange rate commitment. It assumes flexible prices and a banking system that provides credit to entrepreneurial household-firms; the money supply is fully backed by reserves under the currency board. We estimate and evaluate the model by Indirect Inference over the sample period of 1994Q1-2018Q3; we find that it matches the data behaviour, as represented by a VAR. We examined the economy's volatility using bootstrapping of the model innovations, under both the estimated currency board model and a standard alternative regime with floating exchange rate and a Taylor rule; we found that Hong Kong welfare is higher in the currency board, which substantially reduces output volatility.
Subjects: 
Currency Board
Monetary Policy
Hong Kong
Indirect Inference
JEL: 
E52
F41
G51
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.