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Monetary policy regimes and macroeconomic outcomes: Hong Kong and Singapore

  • Petra Gerlach-Kristen

    (Swiss National Bank)

  • Stefan Gerlach

This paper studies the relationship between macroeconomic behaviour and the monetary policy regime in Hong Kong and Singapore, using data for 1984-2004. We estimate an econometric model, comprising a Phillips curve, an IS curve and an equation for changes in the nominal effective exchange rate (NEER), which, in the case of Singapore, can be interpreted as a policy reaction function. The parameter estimates differ in two regards: the NEER responds to inflation in Singapore but not in Hong Kong, and the autoregressive parameter for the output gap in Singapore is smaller than in Hong Kong. Overall, the variability of inflation has been lower in Singapore, but the volatility of real economic activity has been similar in the two economies.

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Paper provided by Bank for International Settlements in its series BIS Working Papers with number 204.

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Length: 34 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:bis:biswps:204
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  1. Eric Parrado, 2004. "Singapore's Unique Monetary Policy; How Does it Work?," IMF Working Papers 04/10, International Monetary Fund.
  2. Mark Crosby, 2000. "Exchange Rate Volatility and Macroeconomic Performance in Hong Kong," Working Papers 032000, Hong Kong Institute for Monetary Research.
  3. Michael B. Devereux, 2003. "A Tale of Two Currencies: the Asian Crisis and the Exchange Rate Regimes of Hong Kong and Singapore," Review of International Economics, Wiley Blackwell, vol. 11(1), pages 38-54, February.
  4. Ramkishen S. Rajan & Reza Siregar, 2002. "Choice of Exchange Rate Regime: Currency Board (Hong Kong) or Monitoring Band (Singapore)?," Australian Economic Papers, Wiley Blackwell, vol. 41(4), pages 538-556, December.
  5. Gerlach-Kristen, Petra, 2006. "Internal and external shocks in Hong Kong: Empirical evidence and policy options," Economic Modelling, Elsevier, vol. 23(1), pages 56-75, January.
  6. Ramon Moreno, 1987. "Exchange rates and monetary policy in Singapore and Hong Kong," Proceedings, Federal Reserve Bank of San Francisco, pages 173-200.
  7. Robert N McCauley, 2002. "Setting Monetary Policy in East Asia: Goals, Developments and Institutions," Occasional Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number occ33, May.
  8. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  9. Gerlach, Stefan, 2005. "Monetary operations by Hong Kong's Currency Board," Journal of Asian Economics, Elsevier, vol. 15(6), pages 1119-1135, January.
  10. M. S. Mohanty & Marc Klau, 2004. "Monetary policy rules in emerging market economies: issues and evidence," BIS Working Papers 149, Bank for International Settlements.
  11. Hans Genberg, 2005. "External Shocks, Transmission Mechanisms and Deflation in Asia," Working Papers 062005, Hong Kong Institute for Monetary Research.
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