This paper first investigates whether there is a cointegration relationship between Hong Kong¡¦s consumption and wealth using the latest cointegration tests that allow for structural breaks. Our tests show there is only limited empirical support for the existence of a cointegration...

This paper estimates pass-through of exchange rate changes to domestic inflation in Hong Kong in a two-step approach. We first estimate exchange rate pass-through to import prices and then from import price to domestic inflation using a Phillips-Curve model. We find that Hong Kong¡¦s exchange...

Under the Linked Exchange Rate system, both Hong Kong dollar (HKD) narrow money (M1) and broad money (M2 and M3) are endogenously determined by factors such as economic activity and capital flows. Although these monetary aggregates do not provide any indication of the policy stance of the Hong...

This paper develops both a bivariate and a multivariate indicator model using a large group of high-frequency economic indicators to forecast Hong Kong's non-rental component inflation. Indicator models can offer timely forecasts on future inflation developments because monthly indicators are...

In macro surveillance work, we often find it difficult to assess the state of the Mainland economy based on unadjusted monthly or quarterly data as the underlying economic trends are obscured by seasonal variations and the effect of moving holidays. Standard procedures exist for seasonal...

The paper explores what information on cross-border fund flows between Hong Kong and the Mainland can be extracted from existing statistics on banking transactions. As the stock of gross liabilities has been larger than claims since mid-1999, the Mainland remains a net supplier of funds (in...

This paper revisits the relationship among consumption, income and wealth using Hong Kong data. We find that the permanent income hypothesis is weakly supported by Hong Kong¡¦s consumption data prior to 1997, but it is not supported for the sample period after 1997 and the whole sample period...

Forward exchange rates convey information about the risk premiums of the currency exposures of the investors. The extraction of these risk premiums provides market information for the expected future values of a currency, which may be useful for policymakers in their market surveillance and...

Taking large open positions in the Hang Seng Index (HSI) futures formed part of the strategy of speculators in the 1998 episode of "speculative attacks" on the Hong Kong dollar and stock markets. The open interest in the HSI futures market has risen in the past three years, at one point to a...

The earnings-price ratio (E/P ratio) of the Hang Seng Index (HSI) and the spreads between the E/P ratio and interest rates are widely used by market practitioners to forecast the stock market outlook. This paper studies their usefulness as indicators of future Hong Kong stock market conditions....