Foreign Exchange Rate and Economic Growth: The Case of Hong Kong

  • John Woods Department of Economics, University of Illinois at Chicago, IL, United States.
  • Brian Hausler SunTrust Bank, Atlanta, GA, United States.
  • Sara Dunning Department of Economics, Florida State University, Tallahassee, FL, United States.
  • Jie Yan School of Economics, Fudan University, Shanghai, China.
  • Hengfu Zhang School of Economics, Hunan University, Changsha, Hunan, China.
  • Youngwoo Kim Research Department, Bank of Korea, Seoul, South Korea.
  • Derrick Beck Department of Economics, University of Tennessee, Knoxville, TN, United States.
  • Gena Jamison Model Risk Group, First Horizon National Corporation, Memphis, TN, United States
  • John Zoboli Department of Economics, Cleveland State University, Cleveland, OH, United States.
  • Jay Waite Department of Economics, University of Huston, Huston, TX, United States.
  • Mark Donohue Department of Economics, University of Miami, Coral Gables, FL.
  • Kevin Carter Department of Economics, University of California, Los Angeles, CA, United States.
Keywords: Hong Kong Dollar Exchange Rate, Economic Growth, Structural VAR Model.

Abstract

The relationship between the exchange rate and the real GDP of Hong Kong in the long period from 1955 to 2015 is investigated using a structural VAR model. The mutual effect of the two variables is studied in three periods: The results indicate that there is no obvious relationship between the exchange rate and real GDP before Hong Kong’s economy booming. However, a significant positive correlation is found in the sample of 1975–1998, which is associated with the output increases. The direction between the exchange rate and real GDP becomes negative after 1998. In addition, based on Granger causality test, we found the exchange rate could Granger causes GDP after 1975, but there is no Granger causality connection between the two variables before 1975.

Downloads

Download data is not yet available.

References

Cooper, R.N. (1971). Government and Economic Development. New Haven, Yale University.

Copelman, M., Werner, A. (1996). The Monetary Transmission Mechanism in Mexico. Federal Reserve Board Working Paper.

Cottani, J., Cavallo, D., Khan, S. (1990). RER Behavior and Economic Performance in LDCs. Economic Development and Culture Change, 39(1), 61-76.

Edwards, S. (1995), Public Sector Deficits and Macroeconomic Stability in Developing Economies. Proceedings, 307-373.

Edwards, S. (1988), Real and Monetary Determinates of Real Exchange Rate Behavior: Theory and Evidence from Developing Countries. Journal of Development Economics, 29(2), 311-341.

Ghura, D., Grennies, T. (1993), The RER and Macroeconomic Performance in Sub Saharan Africa. Journal of Development Economics, 42(3), 155-174.

Galvo, G., Vegh, C. (1993). Open-Economy Macroeconomics. Lodon: McMillan.

Guo, Z. (2017a). Order Flow and Exchange Rate Dynamics in Continuous Time: New Evidence from Martingale Regression. International Journal of Economics and Financial Issues, 7(3), 507-512;

Guo, Z. (2017b). GARCH Models with the Fat-tailed Distributions and the Hong Kong Stock Market Returns. International Journal of Business and Management;

Krugman, P., Taylor, L. (1978). Contractionary Effects of Devaluation. Journal of International Economics and Finance, 8(1), 445-456.

Kamin, S.B. (1996), Exchange Rates and Inflation in Exchange-Rate Based Stabilizations: An Empirical Examination. International Finance Discussion Paper.

Kiguel, M.A. and N. Liviatan (1992). Stopping Three Big Inflations. Washington, D.C.: Country Economics Dept., World Bank.

Morley, S.A. (1992), On the Effect of Devaluation during Stabilization Programs in LDs. Review of Economics and Statistic, 74(1), 21-27.

Rogers, J., Wang, P. (1995), Output, Inflation, and Stabilization in a Small Open Economy: Evidence from Mexico. Journal of Development Economics, 46(3), 271-293.

Razin, O., Collins, S. (1997). Real Exchange Rate Misaligment and Growth. NBER Working Paper No. 6174.

Published
2017-08-06
How to Cite
Woods, J., Hausler, B., Dunning, S., Yan, J., Zhang, H., Kim, Y., Beck, D., Jamison, G., Zoboli, J., Waite, J., Donohue, M., & Carter, K. (2017). Foreign Exchange Rate and Economic Growth: The Case of Hong Kong. Journal of Research in Business, Economics and Management, 9(1), 1636-1640. Retrieved from http://scitecresearch.com/journals/index.php/jrbem/article/view/1202
Issue
Vol 9 No 1: JRBEM
Section
Articles

TRANSFER OF COPYRIGHT

JRBEM is pleased to undertake the publication of your contribution to Journal of Research in Business Economics and Management.

The copyright to this article is transferred to JRBEM(including without limitation, the right to publish the work in whole or in part in any and all forms of media, now or hereafter known) effective if and when the article is accepted for publication thus granting JRBEM all rights for the work so that both parties may be protected from the consequences of unauthorized use.