The regime-dependent evolution of credibility : A fresh look at Hong Kong s linked exchange rate system

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Title: The regime-dependent evolution of credibility : A fresh look at Hong Kong s linked exchange rate system
Author: Blagov, Boris ; Funke, Michael
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
Series number: 24/2013
Year of publication: 2013
Publication date: 4.9.2013
Published in: Published in Macroeconomic Dynamics, Vol 23, No 6 (2019), pp. 2434-2468
Pages: 34 s.
Keywords: valuuttakurssit; uskottavuus; mallit; Kiina; Bofit-kokoelma; Hong Kong; valuuttakomitea; DSGE
JEL: E32; F41; C51; C52
Abstract: An estimated Markov-switching DSGE modelling framework that allows for parameter shifts across regimes is employed to test the hypothesis of regime-dependent credibility of Hong Kong's linked exchange rate system. The model distinguishes two regimes with respect to the time-series properties of the risk premium. Regime-dependent impulse responses to macroeconomic shocks reveal substantial differences in spreads. These findings contribute to efforts at modelling exchange rate regime credibility as a non-linear process with two distinct regimes. Keywords: Markov-switching DSGE models, exchange rate regime credibility, Hong Kong. JEL-Classification: E32, F41, C51, C52
Rights: https://helda.helsinki.fi/bof/copyright


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