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Monetary regime choice in Singapore: Would a Taylor rule outperform exchange-rate management?

  • Chow, Hwee Kwan
  • Lim, G.C.
  • McNelis, Paul D.

A DSGE–VAR approach was adopted to examine the managed exchange-rate system at work in Singapore and to ask if the country had any reason to fear floating the exchange rate and adopting a Taylor rule. The results showed that, in terms of overall inflation volatility, the exchange rate rule had a comparative advantage over the Taylor rule when export-price shocks were the major sources of real volatility while a Taylor rule was preferable when domestic productivity shocks were dominant. The exchange-rate rule also dominated the Taylor rule for reducing inflation persistence.

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Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 30 (2014)
Issue (Month): C ()
Pages: 63-81

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Handle: RePEc:eee:asieco:v:30:y:2014:i:c:p:63-81
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