Singapore's Exchange Rate Policies: Some Implementation Issues

The Singapore Economic Review, Vol. 52, No. 3, pp. 445-458, 2007

Posted: 7 Oct 2010

See all articles by Hwee Kwan Chow

Hwee Kwan Chow

Singapore Management University

Date Written: October 7, 2010

Abstract

Reflecting the small, open nature of its economy, Singapore has adopted an exchange rate centered monetary policy framework since 1981. The exchange rate regime in Singapore is an intermediate regime that follows the basket-band-crawl system. With this managed float system, the MAS had successfully deterred speculators from attacking the domestic currency for most of the past three decades. At the same time, flexibility accorded by the managed float system aided Singapore in escaping from the crisis relatively unscathed. In order to advance our understanding of the hitherto successful operation of Singapore’s exchange rate policy, we examine the following three aspects of its implementation: (i) the use of the exchange rate instead of the interest rate as key monetary policy instrument; (ii) the management of the currency basket in terms of foreign exchange intervention operations; and (iii) regulating the level of domestic liquidity alongside exchange rate policy. This paper also provides some insights on the challenges ahead that potentially face policy makers when implementing Singapore exchange rate policy.

Keywords: exchange rate targeting, intervention operations, domestic liquidity

Suggested Citation

Chow, Hwee Kwan, Singapore's Exchange Rate Policies: Some Implementation Issues (October 7, 2010). The Singapore Economic Review, Vol. 52, No. 3, pp. 445-458, 2007. Available at SSRN: https://ssrn.com/abstract=1688831

Hwee Kwan Chow (Contact Author)

Singapore Management University ( email )

Li Ka Shing Library
70 Stamford Road
Singapore 178901, 178899
Singapore

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