The topic of policy formulation among interdependent economies has received much attention in the literature. China and Hong Kong are economically closely linked. Policy initiatives in one economy may influence the evolution of economics variables in the other. In the first essay a two-country model is used to illustrate the interdependence of these two economies. Not surprisingly, we found that the policy effects are asymmetric, due to differences in size. China’s economic policies have a big effect on Hong Kong, but the reverse is not true. However, China and Hong Kong’s economies are intertwined
