Monetary policy regimes and macroeconomic outcomes: Hong Kong and Singapore

December 2006


The Hong Kong Monetary Authority (HKMA) and the Monetary Authority of Singapore (MAS) have been strikingly successful in delivering on their monetary policy objectives. Following the introduction of a currency board in October 1983, the Hong Kong dollar (HKD) has been rigidly linked to the USD at the rate of 7.8 HKD/USD. While admittedly there are other episodes in which central banks have managed to maintain a fixed exchange rate for more than 20 years, this performance is remarkable given the openness of the Hong Kong economy, the absence of any restrictions on capital flows and the fact that Asia in this period experienced several large economic shocks that were associated with intense speculative pressures on the HKD. Notably, these shocks included the Asian financial crisis, which led to broadly-based reconsideration of exchange rate policies elsewhere in Asia.