Structural Change and Counterfactual Inflation-Targeting in Hong Kong
Paul McNelis ()
No 232009, Working Papers from Hong Kong Institute for Monetary Research
This paper evaluates structural change and adjustment in Hong Kong with Bayesian estimation of a small open economy with a fixed exchange rate show little or no change in the structural parameters or volatility estimates of the structural shocks before and after the Asian crisis and the experience of deflation. Terms of trade shocks are the most important sources of volatility for inflation in both periods. A counterfactual simulation shows that the dispersion of consumption and inflation volatility may have slightly decreased with an inflation-targeting regime with no uncertainty, but interest-rate volatility would have increased by factors of 50 to 100 percent.
Keywords: Bayesian Estimation; Structural Change; Inflation Targeting (search for similar items in EconPapers)
JEL-codes: E62 F41 (search for similar items in EconPapers)
Pages: 30 pages
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon, nep-opm and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:hkm:wpaper:232009
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