Financial crisis and cost deflation high level of

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Unformatted text preview: t Asian currencies depreciated against the Hong Kong dollar (US$). Competitiveness lost. Financial Crisis and Cost Deflation High level of interest rate caused demand contraction. Spread between Hong Kong interbank interest rate and the US treasury bill rate increased, risk premium was high. Investment was discouraged. Asset price deflation is on-going. As wage in labour market was relatively sticky, initial cost adjustment was accomplished through layoffs, unemployment rate increased. The Post-Crisis Dilemma and Challenges Collapse of bubble: shrinkage in real sector could not sustain the fall of nominal sector. Asset price bubble burst causes huge capital loss. Exposed structural imbalance. Fiscal dilemma: more assistance required, coexisted with looming deficits. China opens up further, Hong Kong loses its comparative advantage. Typical unemployment-inflation trade off. Searching for other high value-added activities. International financial centre, innovation and technology, all require human capital investment. Importation of talents may also help the development....
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This document was uploaded on 03/26/2014.

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