TY  - UNPD
A1  - Genberg, Hans
A1  - Hui, Cho-Hoi
T1  - The credibility of The Link from the perspective of modern financial theory
T2  - Working paper series / Institute for Monetary and Financial Stability ; 18
N2  - Hong Kong’s Linked Exchange Rate System (LERS) has been in operation for twenty-five years during which time many other fixed exchange rate systems have succumbed to shocks and/or speculative attacks. This fact alone suggests that the LERS is a robust system which enjoys a large measure of credibility in financial markets. This paper intends to investigate whether this is indeed the case, and whether it has been the case throughout its 25-year history. In particular we will use the tools of modern finance to extract information from financial asset prices about market expectations that are related to the credibility of the LERS. The main focus is on how market participants ‘judged’ the various changes made to the LERS, such as the ‘seven technical measures’ introduced in September 1998 and the ‘three refinements’ made in May 2005. These changes have been characterizes as making the system less discretionary over time, and we hypothesize that they have also made it more credible as revealed in the prices of exchange rate related asset prices. We also investigate the relationship between interest rates and exchange rates in the current system in light of modern models of target-zone exchange rate systems. We will examine whether the intramarginal intervention in November 2007 changed the dynamic properties of the exchange rate as suggested by such models.
T3  - Working paper series / Institute for Monetary and Financial Stability - 18 
KW  - Hongkong
KW  - Wechselkurs
KW  - Geschichte 1983-2008
Y1  - 2008
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/7032
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-70488
UR  - http://www.imfs-frankfurt.de/fileadmin/user_upload/pdf/Working%20Paper%202008_18_Genberg_Hui.pdf
N1  - Prepared for the conference “Hong Kong’s Currency Board at 25” held at the Institute of Historical Research, London on October 21 2008. The views expressed in this paper are the authors’ and do not necessarily represent those of the Hong Kong Monetary Authority.
N1  - Published in: Journal of Money, Credit, and Banking, 2011, vol. 43, issue 1, pp. 185-206
ER  -