Recently, there has been widespread discussion suggesting that the implementation of the Hong Kong National Security Law may lead to a depreciation of the Hong Kong dollar (i.e., an increase in the expected exchange rate EH/FeE^e_{H/F}EH/Fe), potentially putting pressure on Hong Kong’s Linked Exchange Rate System (a type of fixed exchange rate system).
Please explain the advantages and disadvantages of using interest rate hikes and capital controls to maintain a fixed exchange rate. (10 points)