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Impacts of Ageing Population on Monetary and Exchange Rate Managements in Singapore


  • Paul S. L. Yip

    (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore)

  • K. C. Tan

    (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore)


This paper finds that the ageing of the population in Singapore will cause a reversal of the current net Central Provident Fund (CPF) contribution into a substantial net CPF withdrawal from 2025, with a peak occurring at 2035. The result is qualitatively robust to changes in the underlying assumptions of the projection. The paper then highlights the implications of this change on the exchange rate and monetary managements in Singapore. First, the Monetary Authority of Singapore (MAS)’s ability to influence Singapore’s exchange rate will be greatly hampered. Second, the net CPF withdrawal will mean sustained liquidity injection into (instead of the usual liquidity drain from) the economy. To avoid unnecessary inflation, the MAS has to find a sustainable way to mob up the excess liquidity due to the sustained liquidity injection. As a simple reversal of MAS’s current foreign exchange market operation will result in substantial shrinkage of foreign reserves, the paper proposes the issuance of government bonds to achieve the dual objectives of mobbing up the excess liquidity and avoiding the shrinkage of foreign reserves. This measure will also help the bond market development in Singapore. Finally, the paper proposes two other measures that can help maintain MAS’s influence on Singapore’s exchange rate to a reasonable level in the longer future.

Suggested Citation

  • Paul S. L. Yip & K. C. Tan, 2005. "Impacts of Ageing Population on Monetary and Exchange Rate Managements in Singapore," Economic Growth Centre Working Paper Series 0511, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
  • Handle: RePEc:nan:wpaper:0511

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    More about this item


    Ageing Population; Central Provident Fund; Exchange Rate System; Monetary Policy; Singapore.;

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies


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