| Abstract | A comparison of US and Hong Kong prices does not suggest that at the linked rate the HK dollar is either significantly over or under-valued. Two real effective exchange rate indices (REEEIs) are presented for Hong Kong. Increased demand for Hong Kong services, and structural factors, resulted in the REERI based on consumer prices rising significantly during the 1990s. However, when the calculations are done using the prices of traded goods, the REERI shows no trend and relatively small fluctuations. This suggests the linked exchange rate system has provided stability without causing any loss of competitiveness for the traded goods sector. |
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