Exchange Market Pressure and the Credibility of Macau’s Currency Board
Autor(a) principal: | |
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Data de Publicação: | 2004 |
Outros Autores: | , , |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10362/82958 |
Resumo: | In this study, we assess the credibility of the currency board arrangement (CBA) of the Macau Special Administrative Region by studying the relationship between exchange market pressure (EMP) and the anchors of a rule-based CBA, namely, interest rate arbitrage, exchange rate arbitrage and economic discipline. A pure CBA signals its credibility by allowing the first two anchors to function automatically and by pursuing sound fiscal policies. The analysis’ results suggest that Macau’s CBA has been characterised by a state of low volatility since late 1992, with the brief exception of the East Asian financial crisis period. The paper’s main finding is that fiscal fundamentals seem to have a more pronounced role in reducing EMP’s variability during periods of low volatility whilst interest rate arbitrage is more important in periods of high volatility. We conclude that Macau’s CBA is credible at present as reflected in the low frequency of observed EMP, in the narrowing of Macau’s interest rate differential vis-à-vis U.S. interest rates and in Macau’s substantial fiscal reserves. |
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Exchange Market Pressure and the Credibility of Macau’s Currency BoardCurrency Board ArrangementExchange Market PressureRegime-SwitchingIn this study, we assess the credibility of the currency board arrangement (CBA) of the Macau Special Administrative Region by studying the relationship between exchange market pressure (EMP) and the anchors of a rule-based CBA, namely, interest rate arbitrage, exchange rate arbitrage and economic discipline. A pure CBA signals its credibility by allowing the first two anchors to function automatically and by pursuing sound fiscal policies. The analysis’ results suggest that Macau’s CBA has been characterised by a state of low volatility since late 1992, with the brief exception of the East Asian financial crisis period. The paper’s main finding is that fiscal fundamentals seem to have a more pronounced role in reducing EMP’s variability during periods of low volatility whilst interest rate arbitrage is more important in periods of high volatility. We conclude that Macau’s CBA is credible at present as reflected in the low frequency of observed EMP, in the narrowing of Macau’s interest rate differential vis-à-vis U.S. interest rates and in Macau’s substantial fiscal reserves.Nova SBERUNBraga de Macedo, JorgeBraz, JoséBrites Pereira, LuísNunes, Luís Catela2019-10-02T10:04:37Z2004-07-132004-07-13T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10362/82958engBraga de Macedo, Jorge, Braz, José, Brites Pereira, Luís and Nunes, Luís Catela, Exchange Market Pressure and the Credibility of Macau’s Currency Board (July, 2004). FEUNL Working Paper Series No. 492info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2024-03-11T04:36:52Zoai:run.unl.pt:10362/82958Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-20T03:36:14.710098Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Exchange Market Pressure and the Credibility of Macau’s Currency Board |
title |
Exchange Market Pressure and the Credibility of Macau’s Currency Board |
spellingShingle |
Exchange Market Pressure and the Credibility of Macau’s Currency Board Braga de Macedo, Jorge Currency Board Arrangement Exchange Market Pressure Regime-Switching |
title_short |
Exchange Market Pressure and the Credibility of Macau’s Currency Board |
title_full |
Exchange Market Pressure and the Credibility of Macau’s Currency Board |
title_fullStr |
Exchange Market Pressure and the Credibility of Macau’s Currency Board |
title_full_unstemmed |
Exchange Market Pressure and the Credibility of Macau’s Currency Board |
title_sort |
Exchange Market Pressure and the Credibility of Macau’s Currency Board |
author |
Braga de Macedo, Jorge |
author_facet |
Braga de Macedo, Jorge Braz, José Brites Pereira, Luís Nunes, Luís Catela |
author_role |
author |
author2 |
Braz, José Brites Pereira, Luís Nunes, Luís Catela |
author2_role |
author author author |
dc.contributor.none.fl_str_mv |
RUN |
dc.contributor.author.fl_str_mv |
Braga de Macedo, Jorge Braz, José Brites Pereira, Luís Nunes, Luís Catela |
dc.subject.por.fl_str_mv |
Currency Board Arrangement Exchange Market Pressure Regime-Switching |
topic |
Currency Board Arrangement Exchange Market Pressure Regime-Switching |
description |
In this study, we assess the credibility of the currency board arrangement (CBA) of the Macau Special Administrative Region by studying the relationship between exchange market pressure (EMP) and the anchors of a rule-based CBA, namely, interest rate arbitrage, exchange rate arbitrage and economic discipline. A pure CBA signals its credibility by allowing the first two anchors to function automatically and by pursuing sound fiscal policies. The analysis’ results suggest that Macau’s CBA has been characterised by a state of low volatility since late 1992, with the brief exception of the East Asian financial crisis period. The paper’s main finding is that fiscal fundamentals seem to have a more pronounced role in reducing EMP’s variability during periods of low volatility whilst interest rate arbitrage is more important in periods of high volatility. We conclude that Macau’s CBA is credible at present as reflected in the low frequency of observed EMP, in the narrowing of Macau’s interest rate differential vis-à-vis U.S. interest rates and in Macau’s substantial fiscal reserves. |
publishDate |
2004 |
dc.date.none.fl_str_mv |
2004-07-13 2004-07-13T00:00:00Z 2019-10-02T10:04:37Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10362/82958 |
url |
http://hdl.handle.net/10362/82958 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
Braga de Macedo, Jorge, Braz, José, Brites Pereira, Luís and Nunes, Luís Catela, Exchange Market Pressure and the Credibility of Macau’s Currency Board (July, 2004). FEUNL Working Paper Series No. 492 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
Nova SBE |
publisher.none.fl_str_mv |
Nova SBE |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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RCAAP |
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RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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