Zhao, Zhiqi
2021.
Currency board and full exchange intervention in HK
small open economy DSGE with indirect inference assessment.
PhD Thesis,
Cardiff University.
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Abstract
This thesis studies the economy of Hong Kong through the lens of a small open economy DSGE model with a currency board exchange rate commitment. It assumes flexible prices and a banking system that provides credit to entrepreneurial household-firms, with both collateral and cost of verification. We estimate and evaluate the model by Indirect Inference over the sample period of 1994Q1-2018Q3; we find that it matches the data behaviour, as represented by a VAR. We also evaluate a second version of the model in which there is a housing collateral constraint on consumers as in Iacoviello and Neri (2010), and widely used in Hong Kong modelling. However, this version is rejected by the Hong Kong data. In addition, we find out that the housing market has no role in the economy as the housing demand shock accounts for nearly zero, even in the estimated collateral model. We examined the economy’s volatility using bootstrapping of the model innovations, under both the estimated currency board model and a standard alternative regime with floating exchange rate and a Taylor rule; we found that Hong Kong welfare is higher in the currency board, as it substantially reduces output and inflation volatility.
Item Type: | Thesis (PhD) |
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Date Type: | Acceptance |
Status: | Unpublished |
Schools: | Business (Including Economics) |
Uncontrolled Keywords: | Currency Board, Monetary Policy, Hong Kong, Indirect Inference, Housing, Collateral, DSGE. |
Date of First Compliant Deposit: | 16 April 2021 |
Date of Acceptance: | 15 April 2021 |
Last Modified: | 06 Jan 2022 02:13 |
URI: | https://orca.cardiff.ac.uk/id/eprint/140510 |
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