Prior to the late 1990s, low unemployment was a standard feature of macroeconomic life in Hong Kong. Between 1985 and 1997, the unemployment rate averaged 2.5 percent. But the picture changed dramatically thereafter with the unemployment rate rising to 6.2 percent by 1999 and remaining above 5...

The emergence and persistence of basis spreads in cross-currency basis swaps (CCBSs) since the global financial crisis have become a mystery in international finance, as they violate the long standing principle of covered interest parity (CIP). We argue that the phenomenon is no mystery but...

This paper develops an empirical framework to determine if the Asian currency crisis was contagious, and if so, whether the contagion was warranted or unwarranted. By applying a monetary-portfolio model to monthly data for 1991-1998, our results show that short-run variations in exchange rates...

This working paper was written by Dudley Cooke (Trinity College Dublin).I develop a two country general equilibrium model with heterogeneous price-setting firms to understand how shocks to monetary policy and aggregate labor productivity impact trade integration, which I capture through the...

This working paper was written by Cho-Hoi Hui (Hong Kong Monetary Authority), Chi-Fai Lo (The Chinese University of Hong Kong) and Ho-Yan Ip (The Chinese University of Hong Kong).Asymmetric behaviour has been documented in unemployment rates which increase quickly in recessions but decline...

This working paper was written by Juan Carlos Martinez Oliva (Bank of Italy).In view of the debate on exchange rate stabilization in Asia, this paper introduces a new and original approach to the determination of equilibrium real exchange rates (ERER) across ASEAN+3. Existing literature usually...

This working paper was written by Dudley Cooke (Trinity College Dublin and Hong Kong Institute for Monetary Research).I develop a two country general equilibrium model with heterogeneous price-setting firms to understand how shocks to monetary policy and aggregate labor productivity impact trade...