This paper extends the new hybrid Keynesian Phillips Curve (NKPC) to the open-economy context. We hypothesize that pricing decisions depend on both labour costs and intermediate imported input prices. The results for Hong Kong are consistent with the theory if import prices are given substantial...

We provide empirical evidence on the dynamics of prices and wages in Hong Kong. The results suggest that the post-1997 deflation can be understood using a conventional macroeconomic framework wherein foreign influences constitute the basic underlying shocks, and adjustment processes in domestic...