This paper presents evidence on whether Hong Kong's currency board arrangement, in place since 1983, has affected the volatility of real macroeconomic variables. Simple evidence on the relative volatilities of relevant macroeconomic variables, pre and post,1983 is presented, before a more formal...

We use a class of stochastic volatility models with multiple latent factors to investigate the joint dynamics of return, trading volume, and open interest (a proxy for market depth) in currency futures markets. In accordance with theory, the empirical evidence indicates that there is more than...

The debate on renminbi (RMB) revaluation has not subsided, despite the policy change announced by the Chinese authorities in July 2005. In this chapter, we show that the evidence of RMB undervaluation may not be as strong as it appears. Specifically, depending on the method used, the evidence...

Both empirical evidence and theoretical discussion has long emphasized the impact of ¡¥news¡¦ on exchange rates. In most exchange rate models, the exchange rate acts as an asset price, and as such responds to news about future returns on assets. But the exchange rate also plays a role in...

This paper investigates the effect of US monetary policy announcements on the term structure of US interest rate differentials with Hong Kong and Singapore. US monetary policy surprises on domestic and international interest rates are measured by using data from short-term interest rate futures...

The paper studies the interactions between the U.S. and four East Asian markets. The focus is on the change in the information structure/flow between these markets triggered by the 1997 Asian financial crisis. It is shown that the information structure during the crisis period was different from...

This paper looks at the possibility of applying inflation targeting as a policy in China. It argues that despite the appeal of discipline, there is a host of problems concerning the feasibility and optimality of such a policy. Difficulties abound in the transmission mechanisms involving...

This is an examination of the intraday trading activities of index stocks on the common expiration day of index derivatives. In Hong Kong, index futures and index options use an Asian-style settlement procedure. All contracts are settled against the estimated average settlement (EAS) price,...

We extend the classic Balassa-Samuelson model to an environment with search unemployment. We show that the classic Balassa-Samuelson model with the assumption of full employment emerges as a special case of our more generalized model. In our generalized model, the degree of labor market...

This study examines the information conveyed by options, and examines their implied volatility at the time of the 1997 Hong Kong stock market crash. The paper determines the efficiency of implied volatility as a predictor of future volatility by comparing it to other candidate leading...