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Application of the IS-MP-IA model to the Singapore economy and policy implications

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  • Yu Hsing

    () (Southeastern Louisiana University)

Abstract

Extending the IS-MP-IA model (Romer, 2000), we find that equilibrium output in Singapore is negatively affected by the expected inflation rate and the world interest rate and positively influenced by real appreciation, stock market performance, and world output. Equilibrium GDP would rise by 0.872% if the real effective exchange rate rises by 1%. The coefficient of real government deficit spending is found to be insignificant, suggesting that pursuing fiscal discipline and budget surpluses in the long run by the Singapore government is appropriate.

Suggested Citation

  • Yu Hsing, 2005. "Application of the IS-MP-IA model to the Singapore economy and policy implications," Economics Bulletin, AccessEcon, vol. 15(6), pages 1-9.
  • Handle: RePEc:ebl:ecbull:eb-04o10013
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    References listed on IDEAS

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    1. Craig Burnside & Martin Eichenbaum & Jonas D. M. Fisher, 1999. "Assessing the effects of fiscal shocks," Working Paper Series WP-99-18, Federal Reserve Bank of Chicago.
    2. M Bahmani-Oskooee & I Miteza, 2003. "Are Devaluations Expansionary or Contractionary? A survey article," Economic Issues Journal Articles, Economic Issues, vol. 8(2), pages 1-28, September.
    3. Edward, Sebastian, 1986. "Are Devaluations Contractionary?," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 501-508, August.
    4. Wilson, Peter & Tat, Kua Choon, 2001. "Exchange rates and the trade balance: the case of Singapore 1970 to 19961," Journal of Asian Economics, Elsevier, pages 47-63.
    5. Chou, Win Lin & Chao, Chi-Chur, 2001. "Are currency devaluations effective? A panel unit root test," Economics Letters, Elsevier, vol. 72(1), pages 19-25, July.
    6. Fujii, Eiji, 2002. "Exchange Rate and Price Adjustments in the Aftermath of the Asian Crisis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(1), pages 1-14, January.
    7. Wongbangpo, Praphan & Sharma, Subhash C., 2002. "Stock market and macroeconomic fundamental dynamic interactions: ASEAN-5 countries," Journal of Asian Economics, Elsevier, pages 27-51.
    8. Alba, Joseph D. & Papell, David H., 1998. "Exchange rate determination and inflation in Southeast Asian countries," Journal of Development Economics, Elsevier, pages 421-437.
    9. David H. Romer, 2000. "Keynesian Macroeconomics without the LM Curve," Journal of Economic Perspectives, American Economic Association, pages 149-169.
    10. David H. Romer, 2000. "Keynesian Macroeconomics without the LM Curve," Journal of Economic Perspectives, American Economic Association, pages 149-169.
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    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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