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Should Hong Kong Maintain A Linked Exchange Rate System?, Hoi Yin Tsoi
Should Hong Kong Maintain A Linked Exchange Rate System?, Hoi Yin Tsoi
Lingnan Journal of Banking, Finance and Economics
The linked exchange rate was implemented in 1983. This paper finds that over these 32 years, this system did bring lots of benefits to Hong Kong. Nevertheless, as Hong Kong is a vastly different place now relative to what it was 32 years ago, the costs for the adoption of the link outweigh the benefits so this system is no longer suitable for Hong Kong. It is suggested that in order to serve the best interest of Hong Kong, it should not maintain the linked exchange rate system and should switch to the managed floating exchange rate system.