The Monetary Framework Underlying the Hong Kong Dollar Stabilization Scheme

Extract

The currency stabilization scheme announced by the Hong Kong Government on 15 October 1983 and implemented from 17 October represents a return to the modified colonial currency board system which had operated in Hong Kong from 1935 until June 1972, which in turn was a modified version of the currency system that had operated in Hong Kong from the earliest days of British administration up to 1935. Before describing the new system it is useful to review briefly the various systems that have operated in Hong Kong in the past: the silver standard, which existed almost from the outset and continued until 1935; the sterling standard, maintained from 1935 to mid 1972; the short-lived quasi-US dollar standard in operation from July 1972 to November 1974; and the floating exchange rate system or pure Hong Kong dollar standard, which survived from November 1974 until October 1983. Emphasis throughout will be placed on the determination of the quantity of money or money supply in circulation.