Publication Type
Working Paper
Version
publishedVersion
Publication Date
1-2013
Abstract
This paper adopts a dynamic stochastic general equilibrium-vector autorgressive (DSGE-VAR) approach to examine the managed exchange-rate system at work in Singapore. We examine if the country has any reason to fear floating the exchange rate and adopting a Taylor rule. Our results show that, in terms of overall inflation volatility, the exchange rate rule has a comparative advantage over the Taylor rule when export price shocks are the major sources of real volatility, while a Taylor rule dominates when domestic productivity shocks drive real volatility. The exchange-rate rule also dominates the Taylor rule for reducing inflation persistence.
Keywords
Inflation targeting, Taylor rule, Exchange-rate management, DSGE-VAR estimation
Discipline
Asian Studies | Finance | International Economics
Research Areas
Macroeconomics
Citation
CHOW, Hwee Kwan; Lim, G.C.; and McNelis, P..
Monetary Regime Choice in Singapore: Would a Tayor Rule Outperform Exchange-Rate Management?. (2013).
Available at: https://ink.library.smu.edu.sg/soe_research/1474
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Comments
under review at the Journal of Asian Economics.