A survey of exchange rate systems with focus on currency boards and on Hong Kong's experience in particular

The choice of an exchange rate regime can make or break a regional economy. While a stable currency is useful to businesses, exchange rate flexibility also has its proponents. This thesis will first describe a brief history of exchange rate systems. Then, it will provide a survey and analysis of the benefits and drawbacks of different exchange rate systems. I will focus in particular on currency board arrangements. Some of them experience remarkable success, while others fail. The factors that contribute to the success of a currency board arrangement will be investigated. I will consider in particular the experience of Hong Kong, which has a mature experience in having a currency board to maintain a linked exchange rate system and stabilize its currency. This thesis studies Hong Kong's linked exchange rate system and discusses whether the system will continue to be optimal for Hong Kong. Finally, I will discuss the feasibility of alternative exchange rate systems in Hong Kong.