| In an open economy, the exchange rate is the core of economic variables, and the system of exchange rate is just like a bridge maintaining the balance of home and abroad. To make financial system stable and powerful, international economists have attached much importance to the problem of choosing the right system of exchange rate especially since the 1990s when financial crises happened frequently. The Currency Board Arrangement (CBA) that the thesis studies is one of the eight categories of exchange rate systems that IMF defines. As an essential part of fixed exchange rate system, CBA plays an important role in the history of the international exchange rate system. The collapse of CBA in Argentina has given an alarm to the countries that adopt the this kind of exchange rate system and Hong Kong is just one of them. And this dissertation focuses on whether CBA is a long-term choice for Hong Kong and whether it can meet the needs of Hong Kong in future . This thesis proceeds with the development of the international exchange rate system, then studies the generality of CBA, after that analyses the future of the link exchange rate system, finally draws a conclusion that on the one hand either dollarization or insisting the link exchange rate system permanently is not a good choice for Hong Kong , on the other hand ,though it is obvious that Hong Kong dollar will choose to tie to RMB, the present condition is unripe .So as a best choice ,we must insist link exchange rate system and it will lay a solid foundation for the link of two currencies in the future.As regard to the structure of this thesis, the author divides it into three chapters altogether. Chapter One " Development of the international exchange rate system " explains the development and characteristics of international exchange rate system from two perspectives. Section One discusses three important stages in the history of international exchange rate system. Section Two explains the present characteristics of exchange rate arrangement that more and more countries prefer to choose fixed or floating exchange rate system instead of other kinds. Chapter Two " The mechanism and utility of CBA " probes into the essential feature, advantages and disadvantages of the exchange rate system. This chapter is composed of four parts altogether. Part One discusses five essential features of CBA which can be applied to the linked exchange rate system too. Part Two explains different parts of mechanism about CBA. Part Three illustrates both advantages and disadvantages about CBA. According to the current situations, CBA is good at restraining economy from galloping inflation and promoting the stability of financial system. Compared with its advantages, its defects are also worthy of being taken into consideration. The last section explains the adoption of this exchange rate system not merely depends on the monetary system itself, more importantly, it depends on financial environments of the country such as stability of financial system and rationality of the foreign capitals structure.Chapter Three " Sustenance of link exchange rate system in Hong Kong " is the key chapter of this thesis and it is also the purpose of writing this paper. This chapter consists of four parts. Part one describes the establishment and the framework of link exchange rate, then introduces the similarities and difference between CBA in Hong Kong and in Argentina. Part Two discusses the function of link exchange rate system and the question it brings forward. The link exchange rate system has been established for almost 20 years which has resisted Mexico financial crisis and Asian financial crisis, so it is proved to be the guarantee of stability of the economy in Hong Kong. Part Three "The future choice of link exchange rate system "is the core of this chapter. This part argues three possible answers for future choices, but none of them is fit for Hong Kong at present. Thus, in the transitional period, the only proper choice for Hong Kong is to maintai... |
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