Hong Kong's Currency Board System

MSc International Economics, Banking & Finance Issues in Money, Banking & Finance, 2013 Assignment 1 Due by 14.00 Friday 22 March to Room A04 Do one question (2000–2500 words) 1. The integration of China and India into the global economy has doubled the size of the worldwide labour force, according to Professor Richard Freeman. Does this change the rules of globalization and justify protectionism against China and India? 2. Is it economically or politically defensible for Central Banks to intervene, acting directly or through agents, in support of domestic equity prices? Under what circumstances would you reverse your conclusions? 3. Discuss the Institutional structure of the US Federal Reserve, European Central Bank and Bank of England and that of the central bank of your home country. What are the similarities in their rate setting institutions, regulatory responsibilities (if any) and government debt management responsibilities (if any)? Which do you consider the best model and why? 4. What have been the costs and benefits of Hong Kong’s currency board system since 1983? Would it be wise to link the Hong Kong dollar to the Chinese renminbi by 2020? 5. “Financial crisis will always be with us.” Discuss methods by which Governments and regulatory authorities could reduce the effects of such crises, or even avoid crisis entirely. Explain fully any negative aspects to such a policy.

Suggested further reading Lecture 1 (David Smith)
Smith David (2007) http://www.economicsuk.com/blog/000493.html Smith David (2007), The Dragon and the Elephant: China, India and the New World Economic Order, Profile Books, UK Freeman, Richard B. (2004), ‘Doubling the Global Work Force: The Challenge of Integrating China, India, and the Former Soviet Bloc into the World Economy’. Presentation, Institute for International Economics, November 8 2004, www.iie.com Huang, Yasheng, and Khanna, Tarun (2003), ‘Can India Overtake China?’, Foreign Policy, July-August 2003, Washington,