In this chapter, I would argue that Hong Kong’s recent inflation is of the “cost-push” category, that it is to a degree self-inflicted, and moreover, that it is triggering a structural adjustment that will have long-term implications on the Hong Kong society. I would urge that the Hong Kong government should make a strong effort to hold back inflation, even if this means a temporary running down of our fiscal reserves. Section II will describe how inflation has evolved over the 1991 to 1995 period. Section III argues that demand-pull inflation, under the linked exchange rate regime, will not cause serious problems for Hong Kong. Section IV explains how cost-push inflation under the linked exchange rate regime will hurt Hong Kong’s economy. Section V discusses the outlook for inflation and what the Hong Kong government may do under the current circumstances. In the Appendix, I will address a technical point about inflation, expectations, and collective bargaining.
Contribution to Book
Inflation : new risks for the Hong Kong economyThe other Hong Kong report 1995
Document TypeBook chapter
PublisherThe Chinese University Press
Publisher StatementCopyright @ The Chinese University of Hong Kong 1995. Access to external full text or publisher's version may require subscription.
Additional InformationISBN of the source publication: 9622016812
Citation InformationHo, L.-s. (1995). Inflation: New risks for the Hong Kong economy. In S. Y. L. Cheung & S. M. H. Sze (Eds.), The other Hong Kong report 1995 (pp. 183-197). Hong Kong: The Chinese University Press.