Hong Kong

Hong Kong initially pegged to the dollar but then allowed its currency to float, with no real monetary policy. Speculative pressures in the early 1980s led to the introduction of a currency board, within which there is some limited scope for monetary and macroprudential policy.

Years Targets and attainment Classification
1974 currency pegged to USD with +/- 2.25% margins full exchange rate targeting LERT
1975-83 currency floating; some financial markets developed and active but monetary instruments underdeveloped and little monetary policy (no central bank) unstructured discretion UD
1984-2017 currency board on USD; various improvements over time in currency board arrangements and in monetary control, including establishment of Hong Kong Monetary Authority 1993 and ‘strong-side convertibility undertaking’ from 2005; monetary policy operates partly via liquidity facility/discount window on bank liquidity and interbank interest rates, later also through transactions in Exchange Fund bills and notes; limited lender of last resort function; major support for stock market in August 1998; active response to Global Financial Crisis, later use of macroprudential policies; Hong Kong business cycle remains more closely synchronised with US than with Mainland China augmented currency board ACB

Selected IMF references: RED 1991 pp45-8, 57-64; RED 1993 pp22-7; RED 1997 pp55-7, 68-9; SR 2000 pp19, 25-6; SI 2005 pp17-20; SR 2006 p8; SR December 2007 pp1-14; SR 2008 pp11-12; SR 2016 p27; SI 2018 pp52-5.

Additional sources: HKMA (2013); HKMA website; Wolf et al (2008).

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