Currency substitution and speculative attacks on a currency board system

S. K. TSANG, Yue MA

Research output: Journal PublicationsJournal Article (refereed)peer-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

Keywords

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

Fingerprint Dive into the research topics of 'Currency substitution and speculative attacks on a currency board system'. Together they form a unique fingerprint.

Cite this