Global Financial Crisis and Hong Kong
1. Introduction
The fixed-linkage system was implemented in Hong Kong since 1983. The interest rates and exchange rates of Hong Kong therefore are closely related to U.S. This report is conducted to examine the influence of U.S. and Hong Kong interest rates and exchange rates movements on Hong Kong economy, the stock markets and the property markets.
1.1 Hong Kong exchange rates
Before the implementation of linked exchange rate system, the Hong Kong exchange rates were volatile. During the period 1981-1984, the rates were fluctuated from HKD$5.13 to HKD$8.3 in exchange of USD. Hong Kong was full of speculative behaviors and fear of depreciation of HKD. Dueling with the monetary crisis, in October 1983, the Government announced the policy fixed-linkage system to stabilize the fluctuation of Hong Kong currency.
The influence of the linkage system was very noticeable. After the enforcement of this system, Hong Kong exchange rate maintained very steady even experienced the stock disaster (1987), the Gulf War (1990), the exchange rate mechanism in Europe (1992), the monetary crisis in Mexico (1994-1995), the financial crisis in Asia (1997-1998) and the “911 incident” (2001).
Exchange Rate of Hong Kong dollars/ U.S.Dollars, 1981-2010
The Link also suggests that the movements of interest rates and exchange rates between Hong Kong and the US are strongly related. Currently, due to the depreciation of US dollar, the value of Hong Kong dollar also lowered. Some people would then question the effectiveness of the linked exchange rate system. This report is going to deeply examine how Hong Kong economy, the stock markets and the property markets be affected by the movements of the interest rates and exchange rates.
1.2 Hong Kong interest rates
The interest rates play a vitally important role in the fixed-linkage system. The automatic interest rate adjustment mechanism contributes to sustain the stability of Hong Kong exchange rate. The graph
The fixed-linkage system was implemented in Hong Kong since 1983. The interest rates and exchange rates of Hong Kong therefore are closely related to U.S. This report is conducted to examine the influence of U.S. and Hong Kong interest rates and exchange rates movements on Hong Kong economy, the stock markets and the property markets.
1.1 Hong Kong exchange rates
Before the implementation of linked exchange rate system, the Hong Kong exchange rates were volatile. During the period 1981-1984, the rates were fluctuated from HKD$5.13 to HKD$8.3 in exchange of USD. Hong Kong was full of speculative behaviors and fear of depreciation of HKD. Dueling with the monetary crisis, in October 1983, the Government announced the policy fixed-linkage system to stabilize the fluctuation of Hong Kong currency.
The influence of the linkage system was very noticeable. After the enforcement of this system, Hong Kong exchange rate maintained very steady even experienced the stock disaster (1987), the Gulf War (1990), the exchange rate mechanism in Europe (1992), the monetary crisis in Mexico (1994-1995), the financial crisis in Asia (1997-1998) and the “911 incident” (2001).
Exchange Rate of Hong Kong dollars/ U.S.Dollars, 1981-2010
The Link also suggests that the movements of interest rates and exchange rates between Hong Kong and the US are strongly related. Currently, due to the depreciation of US dollar, the value of Hong Kong dollar also lowered. Some people would then question the effectiveness of the linked exchange rate system. This report is going to deeply examine how Hong Kong economy, the stock markets and the property markets be affected by the movements of the interest rates and exchange rates.
1.2 Hong Kong interest rates
The interest rates play a vitally important role in the fixed-linkage system. The automatic interest rate adjustment mechanism contributes to sustain the stability of Hong Kong exchange rate. The graph