Real World Example of a Currency Board

Hong Kong has a currency board that maintains a fixed exchange rate between the U.S. dollar and the Hong Kong dollar. Hong Kong’s currency board has a 100% reserve requirement, so all Hong Kong dollars are fully backed with U.S. dollars.1¬†While the currency board contributed to Hong Kong’s trade with the U.S., it also worsened the impact of the 1997¬†Asian financial crisis.

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