Chapter

Why the HK$/US$ Linked Rate System Should Not be Changed

John Greenwood

in Hong Kong's Link to the US Dollar

Published by Hong Kong University Press

Published in print November 2007 | ISBN: 9789622098909
Published online September 2011 | e-ISBN: 9789882207004 | DOI: http://dx.doi.org/10.5790/hongkong/9789622098909.003.0009
Why the HK$/US$ Linked Rate System Should Not be Changed

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This chapter examines the economic benefits which the linked rate system for the Hong Kong dollar has brought to the people of Hong Kong. Three major benefits have been achieved: First, the reduction in inflation resulting from the stabilisation of the currency; second, because the vast majority of Hong Kong's trade is priced in USS$ and the HK$/US$ rate has been stable, those involved in import/export trade have benefited from the linked rate for the HK$; third, those who hold their savings in Hong Kong banks or deposit-taking companies have benefited because they now obtain a rate of interest which is higher than the annual rate of inflation. The chapter also examines the three principal proposals which have been made to amend or replace the current system.

Keywords: linked rate system; Hong Kong dollar; inflation; trade; savings; banks

Chapter.  6537 words.  Illustrated.

Subjects: Business and Management

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