Hong Kong's exchange rate regime:: Lessons from Singapore

Singapore's managed floating exchange rate regime contrasts with Hong Kong's currency board system featured by the Hong Kong–United States dollars peg. This paper appraises the two different exchange rate regimes by comparing their track records in maintaining macroeconomic stability and trade competitiveness in the 1990s. A review of the two regimes' institutional characteristics and macroeconomic performance reveals the systemic inadequacy of Hong Kong's exchange rate regime under a changing global financial environment. As East Asia emerges from the recent financial crisis, Singapore's experience of successfully moving away from a currency board system to a credible managed floating regime offers a lesson worthy of attention from Hong Kong.