Hong Kong's Link to the US Dollar: Origins and Evolution

Hong Kong's Link to the US Dollar: Origins and Evolution

by John Greenwood

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Product Details

ISBN-13: 9789888083671
Publisher: Hong Kong University Press
Publication date: 11/09/2007
Edition description: Reprint
Pages: 320
Product dimensions: 6.00(w) x 9.00(h) x 0.70(d)
Age Range: 18 Years

About the Author

John Greenwood OBE is Chief Economist of INVESCO plc. A graduate of Edinburgh University, he did economic research at Tokyo University and was a visiting research fellow at the Bank of Japan (1970–74). From 1974 he was Chief Economist with GT Management plc, based initially in Hong Kong and later in San Francisco. As editor of Asian Monetary Monitor he was alone in pointing out the flaws in Hong Kong's monetary system in the years leading up to the currency crisis of 1983, and is well-known as the architect of the linked rate between the HK$ and US$ that has been operating ever since. Mr. Greenwood was a director of the Hong Kong Futures Exchange Clearing Corporation (1987–91) and council member the Stock Exchange of Hong Kong (1992–93). An economic adviser to the Hong Kong Government (1992–93), he has been a member of the Committee on Currency Board Operations of the Hong Kong Monetary Authority since 1998. He is also a member of the Shadow Monetary Policy Committee in England. Mr. Greenwood is a director of INVESCO Asia Ltd in Hong Kong, INVESCO Asset Management Singapore Ltd, and the Hong Kong Association in London.

Table of Contents

List of Appendices and Boxes vii

List of Charts, Tables and Figures ix

Foreword Charles Goodhart xiii

Introduction 1

Chapter 1 Currency on the Skids 5

Chapter 2 Time to Blow the Whistle 15

Chapter 3 Monetary Downturn Compounds Trade Woes 37

Chapter 4 Hong Kong's Financial Crisis - History, Analysis Prescription 51

1 Outline of the Argument 53

2 Background to Hong Kong's Present Banking Legislation 54

3 Hong Kong's Monetary Instruments and Why They Don't Work 59

A Liquid Assets - Their Shortcomings as an Instrument of Monetary 'Control 59

B Interest Rates - What's Wrong with Them as an Instrument of Monetary Policy? 64

C The Exchange Fund's Borrowing Scheme: A Twist on Operation Twist 70

D Intervention in the Foreign Exchange Market - Why It Doesn't Work in Hong Kong 72

4 The Old Automatic Adjustment Mechanism - How It Operated and How It Was Undermined 73

A A Superficial View of the Automatic Adjustment Mechanism 75

B A More Comprehensive View of the Business Cycle 76

C The Adjustment Mechanism in an Orthodox Central Bank System 78

D The Adjustment Mechanism in a Typical Colonial Currency Board System 80

E How the Adjustment Mechanism Worked to Align Price Levels 81

F How the Orthodox Adjustment Mechanism Worked: Japan and the USA 1949-71 83

G How the Automatic Adjustment Mechanism Worked; Hong Kong 1952-74 84

H How the Orthodox Adjustment Mechanism Broke Down: Japan 1971-74 86

I The Hong Kong Monetary System in 1982 89

J The Options Facing Hong Kong's Monetary Authorities 90

5 Proposals for a Reform of Hong Kong's Monetary System 92

Chapter 5 How to Rescue the Hong Kong Dollar - Three Practical Proposals 101

Chapter 6 The Stabilisation of the Hong Kong Dollar 137

Chapter 7 The Operation of the New Exchange Rate Mechanism 169

Chapter 8 Why the HK$/US$ Linked Rate System Should Not Be Changed 183

Chapter 9 Adjusting to the Link 203

Chapter 10 Negative Interest Rates - A Comparison of the Hong Kong and Swiss Schemes 217

Chapter 11 Intervention Replaces Arbitrage - The July Package of Monetary Measures 227

Chapter 12 The Impact of the Tiananmen Square Incident on Hong Kong's Monetary System 249

Chapter 13 Epilogue 259

Index 293

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