Inflation : new risks for the Hong Kong economy

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In this chapter, I would argue that Hong Kong’s recent inflation is of the “cost-push” category, that it is to a degree self-inflicted, and moreover, that it is triggering a structural adjustment that will have long-term implications on the Hong Kong society. I would urge that the Hong Kong government should make a strong effort to hold back inflation, even if this means a temporary running down of our fiscal reserves. Section II will describe how inflation has evolved over the 1991 to 1995 period. Section III argues that demand-pull inflation, under the linked exchange rate regime, will not cause serious problems for Hong Kong. Section IV explains how cost-push inflation under the linked exchange rate regime will hurt Hong Kong’s economy. Section V discusses the outlook for inflation and what the Hong Kong government may do under the current circumstances. In the Appendix, I will address a technical point about inflation, expectations, and collective bargaining.
Original languageEnglish
Title of host publicationThe other Hong Kong report 1995
Place of PublicationHong Kong
PublisherThe Chinese University of Hong Kong Press
Number of pages15
ISBN (Print)9622016812
Publication statusPublished - 1 Jan 1995

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