A long term monetary strategy for Hong Kong and China

Research output: Working paperWorking paper seriesWorking Paper

Abstract

Hong Kong is a Special Administrative Region within China, and the Basic Law provides that the Hong Kong SAR and Mainland China are fiscally independent. This paper demonstrates that because fiscal transfers are not permissible Hong Kong SAR and the Mainland need to have two separate currencies, if each is to achieve full employment and fiscal budget balance. An analytical framework is provided in the paper supporting the argument that Hong Kong is in the position to adopt a “full employment budget balance fiscal policy” and to adopt an enlightened monetary policy that aims at bringing aggregate demand to the full employment level. For Mainland China, because full employment budget balance is unlikely to be achievable in the short term and because of its weaker monetary position, a system of linking the RMB to a basket of currencies is recommended as providing both a clear monetary rule and a superior degree of flexibility relative to linking with a key currency at a fixed exchange rate.
Original languageEnglish
Place of PublicationHong Kong
PublisherCentre for Public Policy Studies
Number of pages19
Publication statusPublished - Aug 1997

Publication series

NameCentre for Asian Pacific Studies Working Paper Series
PublisherLingnan College
No.67

Fingerprint

Hong Kong
Full employment
China
Budget balance
Currency
Mainland China
Monetary rules
Fixed exchange rates
Monetary policy
Fiscal
Fiscal transfers
Fiscal policy
Aggregate demand

Bibliographical note

Paper presented at the International Conference on the Economic Development and Transformation of the East Asian Economies, organized by the Department of Decision Sciences and Managerial Economics, Chinese University and the Journal of International Trade and Economic Development, July 27-28, 1997.

Cite this

HO, L. (1997). A long term monetary strategy for Hong Kong and China. (Centre for Asian Pacific Studies Working Paper Series; No. 67). Hong Kong: Centre for Public Policy Studies.
HO, Lok-sang. / A long term monetary strategy for Hong Kong and China. Hong Kong : Centre for Public Policy Studies, 1997. (Centre for Asian Pacific Studies Working Paper Series; 67).
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HO, L 1997 'A long term monetary strategy for Hong Kong and China' Centre for Asian Pacific Studies Working Paper Series, no. 67, Centre for Public Policy Studies, Hong Kong.

A long term monetary strategy for Hong Kong and China. / HO, Lok-sang.

Hong Kong : Centre for Public Policy Studies, 1997. (Centre for Asian Pacific Studies Working Paper Series; No. 67).

Research output: Working paperWorking paper seriesWorking Paper

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HO L. A long term monetary strategy for Hong Kong and China. Hong Kong: Centre for Public Policy Studies. 1997 Aug. (Centre for Asian Pacific Studies Working Paper Series; 67).