Deflation in Hong Kong SAR

Philip Schellekens

No 2003/077, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the causes of deflation in Hong Kong SAR, exploring whether it reflects a prolonged process of adjustment to cyclical shocks or whether it results from price equalization pressures arising from structural integration with mainland China. To gauge the relative importance of these factors, the paper provides both an econometric and a qualitative analysis of the price dynamics between Hong Kong SAR and Shenzhen, a neighboring city in mainland China. It finds that the role of price equalization as a source of deflation is minor. Deflation in Hong Kong SAR is best explained by successive cyclical shocks which have been amplified by balance-sheet and wealth effects.

Keywords: WP; price level; Hong Kong SAR; SAR.; Deflation; Price Equalization; price level gap; equalization pressure; asset price deflation; Hong Kong deflation; Nominal effective exchange rate; Land prices; Inflation; Asset prices; Global (search for similar items in EconPapers)
Pages: 26
Date: 2003-04-01
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Citations: View citations in EconPapers (7)

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