What Have Central Banks from Emerging Market Economies Learnt About the International Transmission of Monetary Policy in Recent Years?

Abstract

Since 1981, monetary policy in Singapore has been centred on managing the trade-weighted nominal effective exchange rate, which has a powerful and predictable influence on domestic prices in a small, open economy. However, given Singapore’s exchange rate-based monetary policy framework and financial openness, domestic interest rates have fallen in line with those in the world’s advanced economies. With lending rates depressed, growth in credit to the domestic non-bank sector has accelerated, contributing to the fairly strong run-up in transaction volumes and prices in the housing market over 2010–12. In addition to posing risks to financial stability, this has exacerbated price pressures stemming from restructuring in the Singapore economy. In response, the MAS has calibrated its monetary policy stance and augmented the exchange rate framework with macroprudential tools and other targeted administrative measures, with a view to securing overall price and financial stability in the economy.

Full publication: The Transmission of Unconventional Monetary Policy to the Emerging Markets

Keywords: Monetary policy, exchange-rate framework, price and financial stability, macroprudential policy

JEL Classification: E440, E520, E580