Publication Type
Working Paper
Publication Date
12-2010
Abstract
This paper uses a DSGE-VAR model to examine the managed exchange-rate system at work in Singapore and asks if the country has any reason to fear floating the exchange rate with a Taylor rule inflation-targeting mechanism that uses the short term interest rate instead of the exchange rate as the benchmark monetary policy instrument. Our simulation results show that the use of a more flexible exchange rate system will reduce volatility in inflation and investment but consumption volatility will increase. Overall, there are neither signi cant welfare gains or losses in the regime shift. Given the highly open and trade dependent nature of the Singapore economy where the policy preference is for exchange rate stability, there is no impetus to abandon the present monetary regime.
Discipline
Asian Studies | Econometrics | Finance
Research Areas
Econometrics
Citation
Chow, Hwee Kwan and McNelis, Paul D..
Need Singapore Fear Floating? A DSGE-VAR Approach. (2010). Research Collection School Of Economics.
Available at: https://ink.library.smu.edu.sg/soe_research/1250
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.
Included in
Asian Studies Commons, Econometrics Commons, Finance Commons