Exchange-Rate Systems and Interest-Rate Behavior: The Experience of Hong Kong and Singapore

Author

Yiu Kuen TSE, Singapore Management UniversityFollow
Paul S. L. YIP, Nanyang Technological University

Publication Type

Working Paper

Version

publishedVersion

Publication Date

7-2002

Abstract

In this paper we consider the implications of the two different exchange-rate systems in Hong Kong (HK) and Singapore (SP) on the economic performance of these two economies. While HK has a pegged exchange-rate regime under a currency board system (CBS), SP has a managed-float system with monitoring band. We examine whether the managed-float system of SP provides an advantage over the rigid CBS of HK in mitigating the recession caused by the Asian Financial Crisis (AFC), and the implications of the differences in the exchange-rate systems on interest-rate behaviour. Our empirical results show that the monitoring band system in SP has not only allowed a greaterflexibility in the choice of the exchange rate, but also a greater autonomy in the choice of interest rate to mitigate the crisis, recession or overheating.

Discipline

Asian Studies | Econometrics | Finance

Research Areas

Econometrics

First Page

1

Last Page

33

Publisher

SMU Economics and Statistics Working Paper Series, No. 09-2002

City or Country

Singapore

Citation

TSE, Yiu Kuen and YIP, Paul S. L.. Exchange-Rate Systems and Interest-Rate Behavior: The Experience of Hong Kong and Singapore. (2002). 1-33.
Available at: https://ink.library.smu.edu.sg/soe_research/1132

Copyright Owner and License

Authors

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

Comments

Published in International Review of Economics & Finance, 2006, 15 (2), 212-227, https://doi.org/10.1016/j.iref.2004.11.004