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

  • Yu Hsing

    ()

    (Southeastern Louisiana University)

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    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.

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    File URL: http://www.accessecon.com/pubs/EB/2005/Volume15/EB-04O10013A.pdf
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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 15 (2005)
    Issue (Month): 6 ()
    Pages: 1-9

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    Handle: RePEc:ebl:ecbull:eb-04o10013
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    1. David Romer, 2000. "Keynesian Macroeconomics without the LM Curve," NBER Working Papers 7461, National Bureau of Economic Research, Inc.
    2. Jonas Fisher, 2000. "Assessing the Effects of Fiscal Shocks," Econometric Society World Congress 2000 Contributed Papers 1499, Econometric Society.
    3. Wilson, Peter & Tat, Kua Choon, 2001. "Exchange rates and the trade balance: the case of Singapore 1970 to 19961," Journal of Asian Economics, Elsevier, vol. 12(1), pages 47-63.
    4. Alba, Joseph D. & Papell, David H., 1998. "Exchange rate determination and inflation in Southeast Asian countries," Journal of Development Economics, Elsevier, vol. 55(2), pages 421-437, April.
    5. Edward, Sebastian, 1986. "Are Devaluations Contractionary?," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 501-08, August.
    6. 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.
    7. 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.
    8. 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.
    9. Wongbangpo, Praphan & Sharma, Subhash C., 2002. "Stock market and macroeconomic fundamental dynamic interactions: ASEAN-5 countries," Journal of Asian Economics, Elsevier, vol. 13(1), pages 27-51.
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