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The Political Economy of Exchange Rate Regimes: Evidence from Hong Kong and Taiwan
Author(s) -
Lin Kenneth S.,
Lee HsiuYun
Publication year - 2002
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/1467-8381.00139
Subject(s) - economics , exchange rate , inflation (cosmology) , vector autoregression , exchange rate regime , open economy , macro , monetary economics , macroeconomics , physics , theoretical physics , computer science , programming language
This paper investigates whether the macroeconomic performance of a small‐ open economy depends on the choice of exchange rate regimes. Hong Kong and Taiwan ‐ two economies with many similar macroeconomic characteristics, but different in their choices of exchange rate regimes ‐ provide a good setting to study the relation between the choice of exchange rate regime and macro‐economic performance. We examine the basic facts of growth and inflation and the coefficients’ stability of their vector autoregression (VAR), as well as cyclical characters of other aggregate variables in Hong Kong and Taiwan. Our empiric finding indicates that macroeconomic performance is not systematically related to exchange rate regimes.