Casino liberalisation and the pataca's double peg

Macao's pataca is tied to the Hong Kong dollar at 1.03 patacas to one Hong Kong dollar, which is itself tied to the US dollar, so the Monetary Authority of Macao imports US monetary policy twice removed. The economy's trajectory changed in 2002 when the government ended the casino monopoly held since 1962 and issued new gaming concessions, drawing large investment from foreign operators, mostly serving mainland Chinese visitors. GDP growth reached double digits in several years after 2004, and gaming revenue overtook Las Vegas by 2006. Because the peg holds interest rates and the exchange rate fixed, the boom produced high inflation in housing and services rather than currency appreciation. The sharp fall in gaming revenue after 2014 and again in the pandemic years explains the contractions visible in Macao's output charts.