Publication Type

Journal Article

Version

Postprint

Publication Date

2-2014

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

Research Areas

Macroeconomics

Publication

Journal of Asian Economics

Volume

30

First Page

63

Last Page

81

ISSN

1049-0078

Identifier

10.1016/j.asieco.2013.09.001

Publisher

Elsevier

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1016/j.asieco.2013.09.001

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