A RE-STATEMENT OF SINGAPORE'S EXCHANGE RATE AND MONETARY POLICIES

Abstract

This policy note, which focuses on Singapore's monetary and exchange rate policies, has a number of objectives. First, it highlights the fact that the Monetary Authority of Singapore (MAS) is equipped with a powerful tool to target the exchange rate level it desires (within limits). Second, it reviews Singapore's exchange rate policy since 1980 and explains that the de facto policy is far more complicated and flexible than the simplistic but oft-noted description of the MAS pursuing a "strong Singapore dollar" policy. Specifically, the paper argues that Singapore's exchange rate regime is an ideal example of the monitoring band system favoured by John Williamson. Third, the paper contrasts the Singapore currency regime with the relatively more inflexible currency board arrangement (CBA) operated in Hong Kong. The relative advantages of Singapore's flexible monitoring band arrangement over Hong Kong's rigidly fixed CBA are highlighted.