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...

A salient feature of Hong Kong's external trade is its intermediation role. As the entrepot for Mainland China, Hong Kong helps channel raw materials and semi-manufacturing products from the rest of the world to the Mainland for further processing and then helps re-export the processed goods and...

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...

This paper investigates whether external political pressures calling for faster renminbi (RMB) appreciation have any statistically significant effect on both the daily returns and the conditional volatility of the RMB central parity rate. We construct various external pressure indicators...

This paper develops a composite real activity index (RAI) using eight monthly activity indicators for the Mainland economy based on the methodology of the Conference Board. The RAI appears to be able to track the Mainland GDP growth quite well. The results from a logit regression indicate that...

This paper adopts a three-equation New Keynesian model to evaluate the appropriateness of China's monetary policy framework. Our simulation results show that a hybrid rule that relies on both interest rate and quantity of money to conduct monetary policy appears to be more suitable than its...

This paper applies a gravity model to investigate the determinants of foreign direct investment (FDI) in East Asia. We find that economic fundamentals (such as market size, per capita income, and country risk indicators), economic and cultural ties, and information asymmetry are important...

While Hong Kong's monetary policy is effectively tied to the US, its real economy has been experiencing increased integration with the Mainland through trade, Foreign Direct Investment (FDI), tourism, and increasingly financial flows. Co-movements of business cycles in Hong Kong and the Mainland...

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...