Currency substitution and speculative attacks on a currency board system

S. K. TSANG, Yue MA

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

10 Citations (Scopus)

Abstract

A currency board arrangement (CBA) is supposed to be robust against attacks. Currency substitution complicates life, with controversial implications for floating versus fixed exchange rate regimes. After reporting evidence of currency substitution in Hong Kong, a monetary model incorporating currency substitution is used to estimate the shadow exchange rate and the probability of speculative attack on the Hong Kong dollar. A decomposition analysis of a Markov-switching model indicates that the no-attack regime was the most durable one. This implies that Hong Kong's quasi CBA was relatively robust against both speculative attacks and currency substitution.
Original languageEnglish
Pages (from-to)53-78
Number of pages26
JournalJournal of International Money and Finance
Volume21
Issue number1
DOIs
Publication statusPublished - 1 Feb 2002

Fingerprint

Currency board
Currency substitution
Speculative attacks
Hong Kong
Attack
Exchange rates
Decomposition analysis
Exchange rate regimes
Floating
Fixed exchange rates
Durables
Markov switching model

Keywords

  • Currency board
  • Currency substitution
  • Hong Kong
  • Markov-switching model
  • Speculative attack

Cite this

@article{c51e272935bf45e99376ecc6a1e5b70f,
title = "Currency substitution and speculative attacks on a currency board system",
abstract = "A currency board arrangement (CBA) is supposed to be robust against attacks. Currency substitution complicates life, with controversial implications for floating versus fixed exchange rate regimes. After reporting evidence of currency substitution in Hong Kong, a monetary model incorporating currency substitution is used to estimate the shadow exchange rate and the probability of speculative attack on the Hong Kong dollar. A decomposition analysis of a Markov-switching model indicates that the no-attack regime was the most durable one. This implies that Hong Kong's quasi CBA was relatively robust against both speculative attacks and currency substitution.",
keywords = "Currency board, Currency substitution, Hong Kong, Markov-switching model, Speculative attack",
author = "TSANG, {S. K.} and Yue MA",
year = "2002",
month = "2",
day = "1",
doi = "10.1016/S0261-5606(01)00015-8",
language = "English",
volume = "21",
pages = "53--78",
journal = "Journal of International Money and Finance",
issn = "0261-5606",
publisher = "Elsevier BV",
number = "1",

}

Currency substitution and speculative attacks on a currency board system. / TSANG, S. K.; MA, Yue.

In: Journal of International Money and Finance, Vol. 21, No. 1, 01.02.2002, p. 53-78.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

TY - JOUR

T1 - Currency substitution and speculative attacks on a currency board system

AU - TSANG, S. K.

AU - MA, Yue

PY - 2002/2/1

Y1 - 2002/2/1

N2 - A currency board arrangement (CBA) is supposed to be robust against attacks. Currency substitution complicates life, with controversial implications for floating versus fixed exchange rate regimes. After reporting evidence of currency substitution in Hong Kong, a monetary model incorporating currency substitution is used to estimate the shadow exchange rate and the probability of speculative attack on the Hong Kong dollar. A decomposition analysis of a Markov-switching model indicates that the no-attack regime was the most durable one. This implies that Hong Kong's quasi CBA was relatively robust against both speculative attacks and currency substitution.

AB - A currency board arrangement (CBA) is supposed to be robust against attacks. Currency substitution complicates life, with controversial implications for floating versus fixed exchange rate regimes. After reporting evidence of currency substitution in Hong Kong, a monetary model incorporating currency substitution is used to estimate the shadow exchange rate and the probability of speculative attack on the Hong Kong dollar. A decomposition analysis of a Markov-switching model indicates that the no-attack regime was the most durable one. This implies that Hong Kong's quasi CBA was relatively robust against both speculative attacks and currency substitution.

KW - Currency board

KW - Currency substitution

KW - Hong Kong

KW - Markov-switching model

KW - Speculative attack

UR - http://commons.ln.edu.hk/sw_master/2059

U2 - 10.1016/S0261-5606(01)00015-8

DO - 10.1016/S0261-5606(01)00015-8

M3 - Journal Article (refereed)

VL - 21

SP - 53

EP - 78

JO - Journal of International Money and Finance

JF - Journal of International Money and Finance

SN - 0261-5606

IS - 1

ER -