Singapore's Exchange Rate Management System
By Ramin Cooper Maysami & Shirley Tan
Abstract
Traditionally, in an era of limited capital mobility, where the domestic financial markets were still relatively undeveloped, the Monetary Authority of Singapore (MAS) relied on direct control measures as main instruments of monetary policy.
From 1965 to the early 1970s, monetary control policies were mainly targeted to reduce growth in bank deposits and limit the availability of foreign assets in domestic banks. In the late 1970s, the traditional instruments of monetary policies - interest rate regulations and direct capital controls - were found to be incompatible with the overall economic thrust of developing a global and sophisticated financial centre in Singapore. Since 1981, MAS had formulated a unique exchange rate policy to achieve the ultimate target of low inflation. This case documents the evolution of Singapore's monetary policy over the last three decades and allows students to explore the reasons and possible consequences of this monetary policy.
Issues: Exchange Rate Management, Exchange Rate Policy
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