The Hong Kong Linked Rate Mechanism: Monetary Lessons for Economic Development

Christopher Culp (), Steve Hanke () and John Greenwood ()
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Christopher Culp: The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise
Steve Hanke: The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise
John Greenwood: The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise

No 6, Studies in Applied Economics from The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise

Abstract: A currency board is a monetary institution that issues notes and coins which are fully convertible into a reserve currency at a fixed rate on demand. Reserves are equal to 100 per cent, or slightly more, of a board’s notes and coins. There have been over seventy currency boards and all have maintained convertibility, even during civil wars. Although successful, currency boards fell victim to changing economic fashions, and most were replaced by central banks after World War II. Hong Kong has one of the few remaining currency board systems, although that system remains largely unknown, even to monetary specialists. An analysis of the evolution and working of Hong Kong’s system is presented in this text. Strengths and weaknesses of the current system are discussed, and measures to correct weaknesses are suggested. The desirability of the currency board system for developing countries, particularly those making the transformation from socialism to capitalism, is also examined.

Keywords: Steve Hanke; Christopher Culp; Hong Kong Dollar; Linked Exchange Rate Mechanism; Johns Hopkins Economics (search for similar items in EconPapers)
Pages: 69 pages
Date: 2013-06, Revised 2013-06
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Citations: View citations in EconPapers (1)

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