Assessing the Credibility of The Convertibility Zone of The Hong Kong Dollar

Laurence Fung and Ip-wing Yu
Additional contact information
Laurence Fung: Research Department, Hong Kong Monetary Authority
Ip-wing Yu: Research Department, Hong Kong Monetary Authority

No 719, Working Papers from Hong Kong Monetary Authority

Abstract: The features under the two-sided Convertibility Zone of the Hong Kong dollar resemble in many ways the target zone exchange rate regime in the literature. Following Tronzano et al. (2000), this paper utilises a Bayesian extension of the Svensson (1991) test, which takes into account the exchange rate movement and the differential between domestic and foreign interest rates, to assess the credibility of the Convertibility Zone since it was introduced in May 2005. The empirical evidence suggests that the Hong Kong Monetary Authority has been successful in building a high degree of credibility in maintaining the Convertibility Zone.

Keywords: Bayesian Analysis; Credibility; Convertibility Zone; Markov Chain Monte Carlo (search for similar items in EconPapers)
JEL-codes: C11 C15 C22 F31 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2007-12
New Economics Papers: this item is included in nep-cba, nep-cna and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.info.gov.hk/hkma/eng/research/working/pdf/HKMAWP07_19_full.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hkg:wpaper:0719

Access Statistics for this paper

More papers in Working Papers from Hong Kong Monetary Authority Contact information at EDIRC.
Bibliographic data for series maintained by Simon Chan ( this e-mail address is bad, please contact ).