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GTAP Resource #287

"The China Money Puzzle: Will Devaluation of the Yuan help or Hurt the Hong Kong Dollar?"
by Wei, S, L Liu, Zhi Wang and W Woo

A Chinese yuan devaluation could affect the stability of the Hong Kong dollar. This paper studies two linkages. The first, trade balance effect is studied through a CGE model. The result shows that the net change in Hong Kong's foreign reserve after a yuan devaluation is in fact negligible. The second, psychological effect is studied by a survey of financial market participants. In spite of the small trade balance effect, all respondents believe that a yuan devaluation would lead to a panic selling of Hong Kong assets. Therefore, a yuan devaluation is bad for Hong Kong dollar primarily through market psychology.

Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
Status: Published
By/In: China Economic Review, an International Journal, Vol. 11(2):171-188, December
Date: 2000
Created: Bacou, M. (9/27/2000)
Updated: Wang, Z. (7/18/2001)
Visits: 2,727
- Asia (East)

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