Arbeitspapier
Should Hong Kong switch to Taylor rule? Evidence from DSGE model
This paper studies the economy of Hong Kong through the lens of a small open economy DSGE model with a currency board exchange rate commitment. It assumes flexible prices and a banking system that provides credit to entrepreneurial household-firms; the money supply is fully backed by reserves under the currency board. We estimate and evaluate the model by Indirect Inference over the sample period of 1994Q1-2018Q3; we find that it matches the data behaviour, as represented by a VAR. We examined the economy's volatility using bootstrapping of the model innovations, under both the estimated currency board model and a standard alternative regime with floating exchange rate and a Taylor rule; we found that Hong Kong welfare is higher in the currency board, which substantially reduces output volatility.
- Language
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Englisch
- Bibliographic citation
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Series: Cardiff Economics Working Papers ; No. E2021/13
- Classification
-
Wirtschaft
Monetary Policy
Open Economy Macroeconomics
- Subject
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Currency Board
Monetary Policy
Hong Kong
Indirect Inference
- Event
-
Geistige Schöpfung
- (who)
-
Meenagh, David
Minford, Patrick
Zhao, Zhiqi
- Event
-
Veröffentlichung
- (who)
-
Cardiff University, Cardiff Business School
- (where)
-
Cardiff
- (when)
-
2021
- Handle
- Last update
-
01.09.2024, 12:33 PM CEST
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Meenagh, David
- Minford, Patrick
- Zhao, Zhiqi
- Cardiff University, Cardiff Business School
Time of origin
- 2021
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