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

Author

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

Abstract

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.

Suggested Citation

  • Chow, Hwee Kwan & Lim, G.C. & McNelis, Paul D., 2014. "Monetary regime choice in Singapore: Would a Taylor rule outperform exchange-rate management?," Journal of Asian Economics, Elsevier, vol. 30(C), pages 63-81.
  • Handle: RePEc:eee:asieco:v:30:y:2014:i:c:p:63-81
    DOI: 10.1016/j.asieco.2013.09.001
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    References listed on IDEAS

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    Cited by:

    1. repec:kap:compec:v:50:y:2017:i:3:d:10.1007_s10614-016-9601-4 is not listed on IDEAS
    2. repec:pid:journl:v:55:y:2016:i:3:p:161-190 is not listed on IDEAS
    3. Heipertz, Jonas & Mihov, Ilian & Santacreu, Ana Maria, 2017. "The Exchange Rate as an Instrument of Monetary Policy," Working Papers 2017-28, Federal Reserve Bank of St. Louis.
    4. Kunze, Frederik, 2017. "Predicting exchange rates in Asia: New insights on the accuracy of survey forecasts," Center for European, Governance and Economic Development Research Discussion Papers 326, University of Goettingen, Department of Economics.
    5. repec:eee:reveco:v:50:y:2017:i:c:p:196-244 is not listed on IDEAS

    More about this item

    Keywords

    Inflation targeting; Taylor rule; Exchange-rate management; DSGE–VAR estimation;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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