Working Papers

From Hong Kong Institute for Monetary Research
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052011: The Fragility of Discretionary Liquidity Provision: Lessons from the Collapse of the Auction Rate Securities Market

Song Han and Dan Li

052010: The Determinants of Vertical Integration in Export Processing: Theory and Evidence from China

Ana Fernandes and Heiwai Tang

052009: Hong Kong Consumer Prices are Flexible

James Yetman

052008: Banking In China: Are New Tigers Supplanting the Mammoths?

Giovanni Ferri

052007: The Property Market and the Macroeconomy of the Mainland: A Cross Region Study

Wensheng Peng, Dickson C. Tam and Matthew S. Yiu

052006: Terms-of-Trade Changes, Real GDP, and Real Value Added in the Open Economy: Reassessing Hong Kong's Growth Performance

Ulrich Kohli

052005: Exchange Rates and Markov Switching Dynamics

Yin-Wong Cheung and Ulf Erlandsson

052004: Testing for Output Convergence: A Re-examination

Yin-Wong Cheung and Antonio Garcia-Pascual

052003: FDI Contribution to Capital Flows and Investment in Capacity

Assaf Razin

052002: Unobservable-Component Estimates of Output Gaps in Five Asian Economies

Stefan Gerlach and Matthew S. Yiu

052001: Offshore Investment Funds: Monsters in Emerging Markets?

Woochan Kim and Shang-Jin Wei

052000: The Foreign Exchange Origins of Japan's Economic Slump and Low Interest Liquidity Trap

Ronald McKinnon and Kenichi Ohno

042017: Exchange Rate Movements and Fundamentals: Impact of Oil Prices and China¡¯s Growth

Shuo Cao and Hongyi Chen

042016: The Coming Wave: Where Do Emerging Market Investors Put Their Money?

G. Karolyi, David T. Ng and Eswar S. PrasadAuthor-Workplace-Name: Cornell University

042015: International Asset Allocations and Capital Flows: The Benchmark Effect

Claudio Raddatz, Sergio Schmukler and Tomas Williams

042014: Interest Rate Determination in China: Past, Present, and Future

Dong He, Honglin Wang and Xiangrong Yu

042013: The Role of Household Saving in the Economic Rise of China

Steven Lugauer and Nelson Mark

042012: The Trade Comovement Puzzle and the Margins of International Trade

Wei Liao and Ana Maria Santacreu

042011: Nowcasting Chinese GDP: Information Content of Economic and Financial Data

Matthew S. Yiu and Kenneth K. Chow

042010: Monetary Policy and Trade Globalization

Dudley Cooke

042009: Insider Trading in Hong Kong: Tests of Stock Returns and Trading Frequency

Michael Firth, T. Y. Leung and Oliver Rui

042008: Assessing Credit Risk of Companies with Mean-Reverting Leverage Ratios

C. F. Lo, T. C. Wong, C. H. Hui and M. X. Huang

042007: The Weak Link Theory of Economic Development

Charles Jones

042006: A Reappraisal of the Border Effect on Relative Price Volatility

Yin-Wong Cheung and Kon S. Lai

042005: Evaluation of Exchange-Rate, Capital-Market, and Dollarization Regimes in the Presence of Sudden Stops

Assaf Razin and Yona Rubinstein

042004: A Comparison of US and Hong Kong Cap-Floor Volatility Dynamics

Paul McNelis and Salih Neftci

042003: Business Cycle Correlations in Asia-Pacific

Mark Crosby

042002: One Reason Countries Pay Their Debts: Renegotiation and International Trade

Andrew Rose

042001: After the Crisis, The East Asian Dollar Standard Resurrected: An Interpretation of High Frequency Exchange Rate Pegging

Ronald McKinnon

042000: Monetary Policy in the Open Economy Revisited: Price Setting and Exchange Rate Flexibility

Michael Devereux and Charles Engel

032017: Can Exchange Rate Dynamics in Krugman¡¯s Target-zone Model be Directly Tested?Abstract: Despite Krugman's (1991) model being a benchmark for modelling target zones, empirical support has been sparse due to the subtle non-linear relationship between the observable exchange rate and underlying unobservable fundamental. This paper provides an alternative approach to derive explicit exchange rate dynamics by approximating a quadratic relationship between the exchange rate and fundamental through a power-series method. The exchange rate dynamics with a parametric class of drift terms of the stochastic fundamental, including zero-trend (Krugman¡¯s model), symmetric and asymmetric mean-reverting forces regarding how central banks intervene are ready for direct empirical tests. The empirical results demonstrate that the derived dynamics following a square-root process (in Krugman¡¯s model), or mean-reverting square-root process, adequately fit the exchange rate data of various target-zone systems including the Exchange Rate Mechanism and the Linked Exchange Rate System of the Hong Kong dollar. The model parameters of the exchange rate dynamics under the asymmetric mean-reverting fundamental are shown to be associated with realignment of the currencies¡¯ target zones

Cho-Hoi Hui, Chi-Fai Lo and Po-Hon Chau

032016: A New Dilemma: Capital Controls and Monetary Policy in Sudden-Stop Economies

Michael Devereux, Eric Young and Changhua Yu

032015: Capital Management and Leverage of Foreign Bank Subsidiaries in a Host Country: A Case in Hong Kong

Kelvin Ho, Cho-Hoi Hui, Ka-Fai Li and Jim Wong

032014: How Does Loan-To-Value Policy Strengthen Banks' Resilience to Property Price Shocks - Evidence from Hong Kong

Eric Wong, Andrew Tsang and Steven Kong

032013: Carry Trades and the Performance of Currency Hedge Funds

Federico Calogero Nucera and Giorgio Valente

032012: China's LGFV Crisis 2011: The Conflict between Local Autonomy, National Interest and Financial Reforms

Leo F. Goodstadt

032011: Asset Price and Monetary Policy - The Effect of Expectation Formation

Nan-Kuang Chen and Han-Liang Cheng

032010: The Role of Bond Finance in Firms' Survival During the Asian Crisis

Marina-Eliza Spaliara and Serafeim Tsoukas

032009: A High-Low Model of Daily Stock Price Ranges

Yan-Leung Cheung, Yin-Wong Cheung and Alan Wan

032008: Markets and Housing Finance

Veronica Warnock and Francis Warnock

032007: State Visits and International Trade

Volker Nitschr

032006: The Value of Information in Growth and Development

Charles Jones

032005: Balance of Payments Surplus and Renminbi Revaluation Pressure

Huayu Sun and Yue Ma

032004: The Impact of Short Selling on the Price-Volume Relationship: Evidence from Hong Kong

Ólan Henry and Michael McKenzie

032003: East Asian Equity Markets, Financial Crises, and the Japanese Currency

Y.L. Cheung, Y.W. Cheung and K.C. Ng

032002: Monetary Policy in East Asia (And Elsewhere): Does Targeting Inflation Require 'Inflation Targeting'?

Hans Genberg

032001: Effects of U.S. Inflation on Hong Kong and Singapore

Yin-Wong Cheung and Jude Yuen

032000: Exchange Rate Volatility and Macroeconomic Performance in Hong Kong

Mark Crosby

022017: Effects of Intermediate Input Tariff Reduction on Innovations in China

Qing Liu and Larry Qiu

022016: SOE and Chinese Real Business Cycle

Daoju Peng, Kang ShiAuthor-Workplace-Name: Chinese University of Hong Kong and Juanyi XuAuthor-Workplace-Name: Hong Kong University of Science and Technology