Exploring the Case for Monetary Integration between the Chinese Mainland and Hong Kong

Cavoli, Tony; Rajan, Ramkishen S.

doi:10.1111/j.1749-124x.2007.00073.x

China and World Economy

2007

DOI: 10.1111/j.1749-124x.2007.00073.x

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Exploring the Case for Monetary Integration between the Chinese Mainland and Hong Kong

Tony Cavoli

Ramkishen S. Rajan

Abstract: This paper presents an empirical investigation on an important policy issue, namely, whether there is any evidence supporting monetary integration between the Chinese mainland and Hong Kong. We follow two lines of inquiry. First, we present a series of simple tests to find the extent to which trade and/or financial linkages exist between the two regions. Second, we use simple inflation and output differentials and structural VAR techniques to test for the degree of business cycle synchronization between the tw… Show more

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Cited by 3 publications

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“…This conclusion is consistent with Cavoli and Rajan (2007) who also find Chinese output growth does not cause Hong Kong output growth (marginally vice versa), although inflation in either economy strongly affects output in the other. That suggests relative costs are driving the increased trade between them.…”

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confidence: 90%

Economics in the Backyard: How Much Convergence is there between China and her Special Regions?

Hallett

Richter

2009

World Economy

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This paper tests the hypothesis that the links and dependency relationships between China and her special regions have changed over the past 20 years with the industrialisation of China, and the emergence of Taiwan as a source of investment and sophisticated manufactures, and Hong Kong as financial centre and supplier of services.Has this changed the size and direction of spillovers in the region, and has it curtailed or eliminated American economic leadership?We use time-varying spectral methods to decompose the links between 6 advanced Asian economies and the US. We find: (a) the links with the US have been weakening, while those within a bloc based on China have strengthened; (b) that this is not new -it has been happening since the 1980s, but has now been reversed by the surge in trade; (c) that Taiwan is more integrated with, and dependent on the Chinese economy, while Hong Kong continues her separate development based on specialisation and comp-arative advantage; (d) that the links with the US are rather complex, with the US able to shape the cycles elsewhere through her control of monetary conditions, but the China zone able to control the size of their cycles; and (e) there appears to be no real evidence that pegged exchange rates encourage convergence; in fact the reverse may be true.

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supporting

confidence: 90%

Economics in the Backyard: How Much Convergence is there between China and her Special Regions?

Hallett

Richter

2009

World Economy

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“…These economies show convergence rather than divergence. This conclusion is in line with Cavoli and Rajan (2007).…”

supporting

confidence: 80%

Trans-Pacific Economic Relations and US-China Business Cycles: Convergence within Asia Versus US Economic Leadership

Hallett

Richter

2011

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of ADBI, the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, JapanTel:+81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.org E-mail: info@adbi.org AbstractThis paper tests the hypothesis that the links and leadership/dependency relationships between the People's Republic of China (PRC), the United States (US), and the other large Asian economies have changed over the past 20 years with the industrialization of the PRC economy. We use time-varying spectral methods to decompose the links between seven advanced Asian economies and the US. We find: (a) the links with the US have been weakening, while those within a bloc based on the PRC have strengthened; (b) that this is not new-it has been happening since the 1980s, but has been partly reversed by the recent surge in trade; (c) that there are two blocs within the Asian economic area: one based on Japan and the Republic of Korea and the other on the PRC and her satellites; (d) that product composition is responsible for this division (and for some movement between the blocs); and (e) that the links between the PRC and the US are rather complex, with the US able to shape the cycles elsewhere through her control of monetary conditions, but the PRC able to control the size of the cycles at home and (to some extent) abroad.JEL Classification: C22, C29, C49, F43, O49

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Hong Kong’s economic integration with Chinese mainland: an index and cointegration analysis of socio-economic indicators

Geng¹,

Chung²

2022

Asia Pacific Business Review

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Exploring the Case for Monetary Integration between the Chinese Mainland and Hong Kong

Cited by 3 publications

References 6 publications

Economics in the Backyard: How Much Convergence is there between China and her Special Regions?

Economics in the Backyard: How Much Convergence is there between China and her Special Regions?

Trans-Pacific Economic Relations and US-China Business Cycles: Convergence within Asia Versus US Economic Leadership

Hong Kong’s economic integration with Chinese mainland: an index and cointegration analysis of socio-economic indicators

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