The regime-dependent evolution of credibility: A fresh look at Hong Kong s linked exchange rate system

Boris Blagov and Michael Funke

No 24/2013, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: An estimated Markov-switching DSGE modelling framework that allows for parameter shifts across regimes is employed to test the hypothesis of regime-dependent credibility of Hong Kong's linked exchange rate system. The model distinguishes two regimes with respect to the time-series properties of the risk premium. Regime-dependent impulse responses to macroeconomic shocks reveal substantial differences in spreads. These findings contribute to efforts at modelling exchange rate regime credibility as a non-linear process with two distinct regimes.

Keywords: Markov-switching DSGE models; exchange rate regime credibility; Hong Kong (search for similar items in EconPapers)
JEL-codes: C51 C52 E32 F41 (search for similar items in EconPapers)
Date: 2013
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Related works:
Journal Article: THE REGIME-DEPENDENT EVOLUTION OF CREDIBILITY: A FRESH LOOK AT HONG KONG'S LINKED EXCHANGE RATE SYSTEM (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:bdp2013_024

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