Deflation in Hong Kong Sar
26 Pages Posted: 21 Dec 2007
There are 2 versions of this paper
Date Written: July 2000
Abstract
This paper examines the causes of deflation in Hong Kong SAR, exploring whether it reflects a prolonged process of adjustment to cyclical shocks or whether it results from price equalization pressures arising from structural integration with mainland China. To gauge the relative importance of these factors, the paper provides both an econometric and a qualitative analysis of the price dynamics between Hong Kong SAR and Shenzhen, a neighboring city in mainland China. It finds that the role of price equalization as a source of deflation is minor. Deflation in Hong Kong SAR is best explained by successive cyclical shocks which have been amplified by balance-sheet and wealth effects.
Keywords: Deflation, Hong Kong SAR, Price stabilization
Suggested Citation: Suggested Citation
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