Is the Hong Kong Dollar Real Exchange Rate Misaligned?

This paper estimates the equilibrium path of the Hong Kong dollar real effective exchange rate (REER) and compares it with the actual path of the Hong Kong dollar REER to assess the extent of real exchange rate misalignment. Empirical results from various approaches of exchange rate assessment adopted in this study generally suggest that there was no obvious evidence of exchange rate misalignment for the Hong Kong dollar in 2006. This is consistent with the observation that there were no obvious signs of macroeconomic imbalances in the Hong Kong economy.