Currency Board Systems and Hong Kong’s Evolving Arrangements

7/30/2019 Currency Board Systems and Hong Kongs Evolving Arrangements

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Currency Board Systems and HongKongs Evolving Arrangements

Professor Tsang Shu-ki

Department of EconomicsHong Kong Baptist University

www.sktsang.com

A presentation at the Central Banking CourseHong Kong Monetary Authority

29 September 2009
http://www.sktsang.com/http://www.sktsang.com/


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Outline of the talk (1)

I. How can an exchange rate be fixed?

II. History of currency boards

III. Classical currency boardsIV. Classical currency boards and modern

monetary economy

V. Modern currency boards and the AELModel


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Outline of the talk (2)

VI. Hong Kongs currency board systembefore and after the seven technical

measures of 9/1998VII. Hong Kongs currency board system

and the three refinements of 5/2005VIII. The prospects for currency boards

References


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I . How can an exchangerate be fixed? (1)

Basically there aretwoways to do so, assumingthat a fixed exchange rate regime isdesirable(which in itself is a separate issue).

I. Government controls and intervention

a) Foreign exchange controls: e.g. China andMalaysia.

b) Foreign exchange market intervention by thecentral bank: difficult for an economy withlarge capital flows, e.g. Bank of England in1992.


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I. How can an exchange

rate be fixed? (2)II. Market-driven methods

a) The Gold Standard (): late 19th

Century and early 20th Century

b) Currency Boards (): previously mainlyin British colonies; now in Hong Kong, Estonia,Lithuania, Bulgaria etc. (Argentina adopted thesystem in 1991 but abandoned it in early 2002.)


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Both II (a) and (b) depend onself-interestedmarket forceto fix the exchange rate, without theneed for government controls or intervention. Thekey activity isarbitrage (). If the prices forthe same product in two sub-markets differ fromeach other, then any market participant can buythe product at a lower price in one sub-market, andsell the product in the other at a higher price. Aprofit will be obtained at no risk. As many market

participants perform similar arbitrage, the twoprices should equalise, provided that thetransaction cost is negligible.


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e.g. If A and B are functional or geographical sub-marketsof the same product andPA


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I . How can an exchange

rate be fixed? (5) If the price, say PA, in one sub-market can be

firmly locked, because of sufficient reserves of the

party that fixes it, the price in the other sub-market,PB,will converge toPA, subject to thetransaction cost (). That was how theGold Standard worked. That is how the currency

board system is supposed to work, although A andPA refer to a different component and its price inthemonetary base ().


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I I . History of currency boards (1)

The first currency board was set up inMauritius in the 19th Century: to be exact

1849. Dozens of economies---many formercolonies of Britain, e.g. Falkland Islands,Malaya, Singapore,---adopted the system. It

worked well in fixing their exchange rates.


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I I. History of currency boards (2)

Country/terriotry Currency peg Establishment year

Argentina US dollar 1991-2001

Bermuda US dollar 1915

Bosnia-Herzegovina German mark/Euro 1997/2002

Brunei Singapore dollar 1967

Bulgaria German mark/Euro 1997/2002

Cayman Islands US dollar 1972

Djibouti US dollar 1949

Eastern Caribbean Central Bank US dollar 1983

Estonia German mark/Euro 1992/2002

Falkland Islands British pound 1899

Faroe Islands Danish krone 1940

Gibraltar British pound 1927

Hong Kong US dollar 1983

Lithuania US dollar/Euro 1994/2002

Table 1 Major Existent Currency Boards


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I I I. Classical currency boards (1)

The idea is surprisingly simple. A currencyboard issues currency notes (paper money),and trivially coins, with 100 per cent foreign

reserves backing at a fixed exchange rate.This represents a strong commitment toeconomic discipline (). Any holderof paper money therefore rests assured thathe can exchange his notes into foreigncurrency at the fixed rate.


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In a modern financial system, people hold muchmore than paper money. Bank deposits typicallyexceed currency notes by ten to twenty times. No

currency boards can have reserves that fully matchbank deposits. Hong Kong's foreign currencyreserves (being the 8th largest in the world) areabout 41% of the total amount of notes and coinsand deposits in Hong Kong dollar.


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How is the exchange rate of bank depositsfixed? Like the gold standard, it is througharbitrage. First, if there is speculation

against the currency, funds will flow out ofthe economy and domestic interest rateswill rise. This should attract back the funds;and the exchange rate can be stabilised.Such a phenomenon is calledspecie flow,orinterest rate arbitrage ().


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I I I . Classical currency boards (4)

However, in a time of crisis, it is doubtfulwhether higher interest rates alone could fix theexchange rate. Hence a more important form of

arbitrage, i.e.currency/exchange rate arbitrage(),is necessary. Since the exchangerate of paper money is fixed, the exchange rateof bank deposits has to follow suit. Any rate

differential gives rise to profitable activity ofcash arbitrage(),that closes the gap.


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Take Hong Kongs system since 1983 as atheoretical example. Since HK$ notes areissued against certificates of indebtedness(CIs) backed by US$ at the rate of 7.80, if the

market rate of deposit weakens to say 8.00against the US dollar, anyone can theoreticallywithdraw cash from his HK dollar depositaccount, surrender the paper money through

the NIBs or other banks to the "currencyboard" (the Exchange Fund) and get US$ at thefixed but stronger rate of 7.80.


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With HK$ 7.8 million in cash, he will be givenUS$ 1 million. By selling the US$ 1 million inthe market, he fetches HK$ 8 million. So he

obtains a profit of HK$ 200,000. That isarbitrage, risk-free (),except that theremay be transaction costs. Many others willwant to do the same. The selling pressure onthe US dollar will push the market rate back to

7.80, i.e., equalising prices in the two sub-markets (the cash market and the depositmarket).


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I I I . Classical currency boards (7) In sum, there are three anchors for a classical

currency board: (1) economic disciplinebecause of the 100% foreign reservesrequirement for the issuance of currency (sotheoretically paper money cannot be increased

without a balance of payments surplus); (2)specie flow in the form of interest arbitrage;and (3) exchange rate (cash) arbitrage thatbinds the spot exchange rate.

As illustrated in Diagram 1, these threeanchors reinforce one another.


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Classical currency boards (8)

Diagram 1: tripod for a classical CB to fix theexchange rateFull reserves cover

and economicdiscipline

Cash arbitrageSpecie flow


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IV. Classical currency boards and

modern monetary economy (1) Theinefficiency of cash arbitragein a modern

monetary economy is however a big problem.

In HK, for example, there are only about 7dollars of cash for every 100 dollars of bankdeposit. Moreover, just 50 cents of the cash arein the hands of banks.

If people engage actively in converting theirdeposits into cash to do arbitrage, it will beequivalent to a bank run.


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IV. Classical currency boards and

modern monetary economy (2) Since the establishment of the linked

exchange rate system, there has been very

little, if at all, cash arbitrage activity. Between 1983 and 1998, the link was

defended with a combination of market

interventions including direct foreignexchange operations and manipulation ofliquidity and interest rates.


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V. Modern currency boards and

the AEL Model (1) Argentina,Estonia andLithuania adopted

varieties of the currency board system in

1991, 1992 and 1994 respectively. I havedubbed them as theAEL Model (). Though latecomers, all threeAELcountries used an improved version of the

system. It overcame the problem of cashmovements for arbitrage, with which HongKong was struggling.


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V. Modern currency boards andthe AEL Model (2)

They instituted a reserves system whereby eachbank had an account with the central bank, inwhich any reserves for notes and deposits as wellas the clearing balances were kept. The central

bank guaranteed the full convertibility of all theclaims of each bank,at the fixed exchange rate.In effect,the convertibility undertaking ()covers the whole monetary base (),i.e. essentially all the domestic liabilities ofthe central bank, andnot only cash.This set-upbypassed the problem of moving cash around forarbitrage.


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Under such a system, no banks will dare quote anexchange rate that deviates from the official rate,say 7.80. If Bank A quotes a rate of 8.00, Bank Bcan immediately sell US$ 1 million to it, fetchingHK$ 8 million, with an instruction that Bank Atransfers the amount to its account at the centralbank, which will convert HK$ 8 million into US$1.026 million for Bank B at the fixed rate of 7.80.

A profit of US$26,000 then goes to Bank B.Other banks will also be jumping at the arbitrageopportunity if Bank A does not change its quote.


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Note thatnocash movements are involved in all theseelectronic transactions (), as the centralbank plays the role of settling arbitrage activitiesbetween banks by providing the necessary foreign

reserves. The market exchange could only deviatefrom the official rate for the small amount oftransaction costs involved, if at all.

With this improved currency board system, Argentina,

Estonia and Lithuania were able to ensure 100 per centstability in their spot exchange rates.


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the AEL Model (5) In 1995, Argentina faced serious crises:

20 per cent of bank deposits were lost in less than

three months; sixty banks folded up;

economic growth rate was a negative 4.6%; and

unemployment shot up to 16%.

Yet the spot market exchange rate adhered strictlyto the official rate (of 1 peso against 1 US$).


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the AEL Model (6) The same miracle occurred in Lithuania.

A banking crisis broke out in December

1995: The nation's two largest banks were closed.

Deposits fell by 15% in the first quarter of1996.

Yet the official rate of 4 litas against 1 USdollar was not challenged at all.


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VI. Hong Kongs currency board beforeand after the 7 technical measures (1)

Between 1984 and April 1998, the Hong Kongcurrency board system did not behave accordingto the theory of the classical currency board. The

key problem was that there was no effectivecurrency arbitrage mechanism. Cash-basedarbitrage was a non-starter, because it representeda very small, and increasingly small, % of totalmoney supply. There was simply very little cashto use for arbitrage.


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VI. Hong Kongs currency board before

and after the 7 technical measures (2) Other than the CIs, there were no explicit

reserves backing or convertibility undertaking.As a result,currency arbitrageoutside cashcould not be carried out. The monetaryauthority had to depend on the manipulation ofinterbank liquidity and interest rates, as well as

outright intervention in the foreign exchangemarket to defend the Hong Kong dollar. Somewould call that central banking in disguise.


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In the meantime, HK embarked on a process ofstrengthening monetary control. In 1988, theAccounting Arrangements were imposed,

giving the monetary authority an indirecthandle on banking liquidity. In the 1990s, theissuance of EFBNs (Exchange Fund bills andnotes), the setting up of the LAF (liquidity

adjustment facility), and the eventualestablishment of the HKMA (Hong KongMonetary Authority) were key milestones.


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The HKMA made it known that it would defendthe Hong Kong dollar by having flexible ways tomanipulate the monetary base and to influence

interest rates. Mr. Andrew Sheng, then Deputy Chief Executive

of the HKMA, said on the heel of the Mexicancrisis, .... in recent years the HKMA has

introduced various reforms to its monetarymanagement tools, or more aptly, our monetaryarmoury, to maintain exchange rate stability.


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... As was seen in January (1995), our determinationto use the interest rate tool was sufficient to deterfurther speculation against the HK dollar. In fact,currently, the HK dollar is at a stronger level than itwas at 1994 year end. (Sheng, 1995, p.60) To theextent that the HKMA intervenes through the use offoreign exchange swaps, any increase in the monetarybase is fully backed by foreign exchange. We use a

whole range of instruments in influencing the level ofinterbank liquidity to manage interbank interest rates,and consequently, maintain exchange rate stability.(p.61)


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In October 1997, the Hong Kong dollar suffered astrong speculative attack. Doubts were cast on the

nature and the robustness of Hong Kongscurrency board. A controversy arose concerningwhether and to what extent the HKMA didintervene in the markets on 23 October 1997, and

was therefore responsible for the unprecedentedhigh interest rates---with overnight interbank ratesgoing up to 280% at one point.


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In April 1998, the HKMA announced acommitment not to actively manage the clearingbalance of the banking system to defend the

exchange rate (FSB, 1998, paras. 3.36-3.41;Annex 3.5), the HKMA would keep to the rule ofautomatic adjustment.

However, the HKMA reserved the option of

discretionary intervention to defend the exchangerate near the 7.80 level.


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Diagram 2 The tripod for HKs CB after April 1998Full reserves cover


Discretionaryinterventionnear 7.80

Specie flow


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The intervention in the stock and futures markets bythe Hong Kong government in August 1998 touchedoff a huge controversy. On 5 September 1998, theHKMA announcedseven technical measures ()to strengthen the link. These measures canactually be grouped into two categories: (1) theconvertibility undertaking (CU) that banks couldexchange their Hong Kong dollar balances with theHKMA into US dollars at the fixed exchange rate of

7.75; and (2) the replacement of the LiquidityAdjustment Facility (LAF) by a formal DiscountWindow (with no penalties against frequent users).


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The first move means that the coverage ofconvertibility was effectively extended from banknotes to the whole monetary base. The Discount

Window, on the other hand, enlarged the monetarybase. As said above, a system of convertiblereserves is the core mechanism in the AEL(Argentina, Estonia and Lithuania) Model of

modernised currency board arrangements. Thenew tripod of CB that the HKMA instituted inSeptember 1998 can be depicted as in Diagram 3.


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It was a partial adoption of the AEL model. TheCU was one-way() (on the weakside) only, but currency arbitrage ensured that the

7.80 fixed rate could not be breached. Furthertidying up of the system since then included the500-day shift of the CU rate from 7.75 to 7.80, theincrease in the transparency of currency board

operations and the changes in the transferabilityand convertibility among the components of themonetary base etc.


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Diagram 3 The tripod for HKs CB after September 1998Full reserves cover

and economic

discipline

OnewayConvertibilityUndertaking

at 7.80

Specie flow


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VII. Hong Kongs currency board and thethree refinements (1)

Since late 2003, speculative pressure on arevaluation of the Chinese renminbi rose

and there were large inflows into HongKong, leading to near zero short terminterest rates, large aggregate balances and

strong spot rates for the HK dollar (at onepoint to about 7.70).

VII H K b d d


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VII. Hong Kongs currency board andthe three refinements (2)

The very low interest rates failed to generate sufficientand effectiveinterest arbitrageto offset therevaluation pressure, i.e. to weaken the exchange rateto the 7.80 level supposedly as a result of outflow offunds.

This was the reverse of the difficulty experiencedbefore the seven technical measures of September1998. Then very high interest rates were not powerfulenough in strengthening the HK dollar againstdevaluation pressure supposedly through attracting

inflow of funds. Hence atwo-way CU ()seemed

necessary.


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On May 18, 2005, the HKMA introducedthethree refinements ():1) a strong-side Convertibility Undertaking by the

HKMA to buy US dollars from licensed banks at7.75;

2) the shifting over 5 weeks of the existing weak-sideConvertibility Undertaking by the HKMA to sell USdollars to licensed banks from 7.80 to 7.85, so as toachieve symmetry around the Linked Rate of 7.80;


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3) within the zone defined by the levels of theConvertibility Undertakings (the "ConvertibilityZone"), the HKMA may choose to conduct marketoperations consistent with Currency Board principles.

These market operations shall be aimed at promotingthe smooth functioning of the Linked Exchange RateSystem, for example, by removing any marketanomalies that may arise from time to time.

With these three refinements, the latest currencyboard system can be depicted as follows:


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Diagram 4 The tripod for HKs CB after May 2005Full reserves cover


TwowayConvertibilityUndertaking

at 7.75 and 7.85

Specie flow


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The wide corridor of 7.75-7.85: Theconvertibility zone () is regarded asvery wide by some commentators but

vulnerable to speculation by others. In myarticle Liquidity management, two-way CU., I discussed the possibility of a powerful

speculator pushing the exchange rate up anddown the corridor of 50 pips(http://www.sktsang.com/ArchiveI/Tsang021201.pdf)
http://www.sktsang.com/ArchiveI/Tsang021201.pdfhttp://www.sktsang.com/ArchiveI/Tsang021201.pdf


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From this perspective, a two-way CU with nospread would kill its fun. The problems that thisgenerates are familiar. The foreign exchange

market in HKD/USD will be displaced, leading tolayoffs. (Some could argue that it is a matter ofsacrificing private interests for the sake of thepublic good.) Moreover, imagine a CU with nospread and a near-zero AB in an international

financial centre. I cant honestly recommend it asa solution and I didnt, especially given HongKongs post-1998 developments.


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What is the alternative? Interestingly, we have totravel some distance to find it. A convertibilityzone of hundreds of pips would mean that any

speculating party, in spite of its market power,faces a relatively spacious corridor and the riskand cost of his actions are increased.

See Tsang Shu-ki, The convertibility zone and

operations to remove market anomalies(www.sktsang.com/ArchiveI/Convertibility zone andanomalies.pdf)
http://www.sktsang.com/ArchiveI/Convertibility%20zone%20and%20anomalies.pdfhttp://www.sktsang.com/ArchiveI/Convertibility%20zone%20and%20anomalies.pdfhttp://www.sktsang.com/ArchiveI/Convertibility%20zone%20and%20anomalies.pdfhttp://www.sktsang.com/ArchiveI/Convertibility%20zone%20and%20anomalies.pdf


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I remember long time ago I used to play one-a-side (plastic) football games with my youngerbrother in the narrow corridor of our old home.

The goals were simply conceived to exist ateither end of the corridor, but long-rangeshooting was forbidden. Being physicallystronger, I always resorted to the ploy of kicking

the ball to one side and then speeding past him onthe other to collect the ball back after its reboundfrom the wall. The rest was peanut.


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What if the corridor had been quite wide? The reboundfrom the wall, from whether the left or the right, wouldhave taken longer to reach me. So my little brother wouldhave had time to turn around and chase the ball almost on a

par with me. I would not have had the easy job of rushingit towards an open goal.

A convertibility zone isa trade-off between stability aswell as credibility on the one hand, and liquidity andflexibility on the other.

This is a reality for the CBA in Hong Kong, which is aninternational financial centre with huge daily capital flows.

Too rigid a system would mean that any pressure cannot beshared by several buffer variables.


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However, a consequence of this flexibility is thephenomenon ofmultiple equilibria among the spotexchange rate, the interest rate and the aggregatebalance. And there isno mean-reverting tendencytowards 7.80 as our linked exchange rate.

In a period of global financial disturbances fromoutside, these non-reverting phenomena involvingdifferent variables are going to become more

pronounced. In any case, the currency board system inHK would probably remain intact. Any cost, if at all,would be borne by other economic variables.


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Aggregate Balance, HIBOR and LIBOR

-50

0

50

100

150

200

250

300

Jan-9

7

Jul-97

Jan-9

8

Jul-98

Jan-9

9

Jul-99

Jan-0

0

Jul-00

Jan-0

1

Jul-01

Jan-0

2

Jul-02

Jan-0

3

Jul-03

Jan-0

4

Jul-04

Jan-0

5

Jul-05

Jan-0

6

Jul-06

Jan-0

7

Jul-07

Jan-0

8

Jul-08

Jan-0

9

Jul-09

HK$B

n

0

5

10

15

20

25

30

35

40

Aggregate Balance (before Discount Window) HIBOR 3M % LIBOR 3M %

Source: HKMA

%


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Interest Rates and Spot Exchange Rate

0

5

10

15

20

25

30

35

40

Jan-9

7

Jul-97

Jan-9

8

Jul-98

Jan-9

9

Jul-99

Jan-0

0

Jul-00

Jan-0

1

Jul-01

Jan-0

2

Jul-02

Jan-0

3

Jul-03

Jan-0

4

Jul-04

Jan-0

5

Jul-05

Jan-0

6

Jul-06

Jan-0

7

Jul-07

Jan-0

8

Jul-08

Jan-0

9

Jul-09

%

7.65

7.70

7.75

7.80

7.85

7.90

HIBOR 3M % LIBOR 3M % HKD/USD

Source: HK MA


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In the aftermath of the latest financial tsunami, theaggregate balance has risen to historicallyunprecedented levels, with interest rates falling to nearzero. Yet the exchange rate has been consistentlystrong, close to the CU of 7.75. Actually the CU hasbeen triggered on quite a number of occasions.

This is a testimony to the robustness of the currencyboard system in Hong Kong.

One risk is of course that there might be a drasticswingto the weak-side CU of 7.85, if internal and/orexternal shocks arise.


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VIII. The prospects forcurrency boards (1)

The currency board system is supposed to bethe most disciplined and transparent fixedexchange rate regime in the world.

Through arbitrage in a situation of sufficientreserves covering the monetary base and soundbanking, theefficiency risk of the spot

exchange rate is largely eliminated. However, thesystemic riskstill remains.

VIII Th t f


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Systemic risk refers to the risk of the systembeing abandoned not because the spotexchange rate cannot be fixed, but as a

result of the economic pains associated witha misaligned exchange rate or very weakeconomic fundamentals (e.g. Argentina),and of any decision based on politics. Risk

premium will be reflected in interest ratesand forward exchange rates. Argentina wasforced to abandon the system in early 2002.


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The Monthly Exchange Rate of the Peso

against the USD

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

1990M1

1990M7

1991M1

1991M7

1992M1

1992M7

1993M1

1993M7

1994M1

1994M7

1995M1

1995M7

1996M1

1996M7

1997M1

1997M7

1998M1

1998M7

1999M1

1999M7

2000M1

2000M7

2001M1

2001M7

2002M1

2002M7

2003M1

2003M7

2004M1

2004M7

2005M1

2005M7

2006M1

2006M7

2007M1

2007M7

2008M1

2008M7

2009M1

MonthSource: I MF

PESO

/USD

VIII Th t f


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The beginning of the end for the AEL Model?Estonia and Lithuania both became a memberof the EU in 2004. Both then joined the

Exchange Rate Mechanism II (ERM II) andofficially stated their objective to adopt theeuro soon after the mandatory minimumrequirement of two years. Estonia has beenmaintaining the currency board arrangement

with a fixed rate of one euro to 15.6466Estonian kroons, while Lithuanias currencyhas been pegged at the rate of 3.4528 litas pereuro.

VIII Theprospectsfor


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However, the process is nothing automatic. Both have beenon the watch list by the European Central Bank on the basisof convergence criteria and conditions for final accession tothe euro area, i.e. the replacement of their own nationalcurrencies by the euro. Estonia's effort has been hindered byfailing to meet the inflation target (a nominal convergencecriterion) set by the EU (Eesti Pank, Estonia's NationalChangeover Plan, July 2009,www.eestipank.info/pub/en/EL/ELiit/euro/eplaan_1.pdf

Lithuania has been bothered by a similar problem, andaccording to the current data, the most favourable periodfor Lithuania to join the euro area will begin from 2010. (Lietuvos Bankas, Adoption of the Euro in Lithuania,www.lb.lt/eng/euro/index.htm.
http://www.eestipank.info/pub/en/EL/ELiit/euro/eplaan_1.pdfhttp://www.lb.lt/eng/euro/index.htmhttp://www.lb.lt/eng/euro/index.htmhttp://www.eestipank.info/pub/en/EL/ELiit/euro/eplaan_1.pdf


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VIII. The prospects for

currency boards (5) The debate between a fixed exchange rate system

and a floating rate regime is a long standing one,and unlikely to be solved any time soon.

In between, there can of course be basket peg,crawling peg, target zone, managed float,and their various combinations.

The purists would argue for corner solutions:either hard peg or clean float, as the variouscombinations suffer from a lack of credibility.

h f


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A small open economy with very flexible assetand factor markets will find it beneficial to adopt afixed rate because the certainty will promote long

term investment and facilitate structural changes.

For developing and emerging markets, it willhelp to impose monetary discipline and promote

the development of long-term capital market(and avoid the original sin).

VIII Th t f


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There may be a fear of floating for smallopen economies, because of the absence of anominal anchor. Some have resorted toinflation targeting as an alternative.

On the other hand, though, whether the fixedrate is an appropriate one, particularly in times

of significant structural or international seachanges, is always a headache. A fixed rate canalso become a sitting duck for speculators.


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currency boards (8) The merit of floating is that it serves as a goodbarometer giving early warning signalsabout the economy. One could say that it

actually imposes continuing discipline on theauthorities as well as the private enterprisesand they should adjust in time. The demerit isvolatility and overshooting typical of financial

markets. Well, the debate will no doubt go on.


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Although the AEL Model is disintegrating, theprinciples behind its operations are sound and canserve as lessons for aspiring fixed exchange rate

regimes, provided that the rate is not misaligned ina fundamental sense and suitable economicpolicies are implemented to support its viability.

There seems to be little choice for Hong Kong butto stick with the currency board system in the nearterm.


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currency boards (10)

In the future, the authorities may consider

the possibility of re-pegging the Hong Kongdollar to the Renminbi or even a monetaryunion with the Mainland. However, manyconditions (including the full convertibilityof the Renminbi) need to be fulfilled first.

R f (1)


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References (1) Blejer, Mario (2003), Argentina: Managing the

Financial Crisis, a presentation at the World Bank on22 October 2003(http://info.worldbank.org/etools/bspan/PresentationView.asp?PID=940&EID=328).

Financial Services Bureau (FSB) (1998), Report onFinancial Market Review, Hong Kong SARGovernment, April.

Gulde-Wolf, Anne-Marie and Keller, Peter (2002),Another Look at Currency Board Arrangements And

Hard Exchange Rate Pegs for Advanced EUAccession Countries, in Urmas Sepp and MarttiRandveer (eds.), Alternative Monetary Regimes inEntry to EMU, Eesti Pank, November.

f ( )


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References (2)

Hanke, Steve H. and Schuler, Kurt (1994), CurrencyBoards for Developing Countries, San Francisco:International Center for Economic Research.

Ho, Corrine (2002), A survey of the institutional andoperational aspects of modern-day currency boards, BIS

Working Paper No. 110, March.

Hong Kong Monetary Authority (HKMA) (1994), ThePractice of Central Banking in Hong Kong.

HKMA (1999), The currency board account and otherfine-tuning measures to strengthen the currency boardarrangements in Hong Kong, Quarterly Bulletin, May,pp.1-6.


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References (3)

Latter, Anthony (1993), The currency boardapproach to monetary policy--from Africa toArgentina and Estonia, via Hong Kong,Monetary Management in Hong Kong, HongKong Monetary Authority, proceedings of theSeminar on Monetary Management.

Nenovsky, Nikolay and Rizopoulos, Yorgos(2003), Extreme Monetary Regime Change:

Evidence from Currency Board Introduction inBulgaria,J ournal of Economic Issues, vol.XXXVII, no. 4, December 2003.

R f (4)


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References (4) Nuge, John (1995), A brief history of the

Exchange Fund,Quarterly Bulletin, Hong KongMonetary Authority, May, pp.1-17.

Sheng, Andrew (1995), The linked exchange rate

system: review and prospects, Quarterly Bulletin,Hong Kong Monetary Authority, May, pp.54-61.

Tsang, Shu-ki (1999a), A Study of the LinkedExchange Rate System and Policy Options for

Hong Kong, consultancy report, Hong KongPolicy Research Institute, submitted in October1996 and published in full in January 1999.

References(5)


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References (5) Tsang, Shu-ki (1999b), Legal Frameworks of

Currency Board Systems, HKMA Quarterly Bulletin,August 1999.

Tsang, Shu-ki (1999c), Fixing the Exchange Ratethrough a Currency Board Arrangement: Efficiency

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Currency Board Systems and Hong Kong’s Evolving Arrangements

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