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Managing in the Middle: Characterizing Singapore's Exchange Rate Policy

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  • Tony Cavoli
  • Ramkishen S. Rajan
Abstract
It is by now common knowledge that there can be a significant divergence in the de facto versus de jure exchange rate regimes operated by economies. Although much of the recent published literature in Asia has focused on the crisis‐hit economies, Korea and Thailand in particular, scant attention has been paid to Singapore, which officially targets its nominal effective exchange rate (around a band). The present paper examines the degree of exchange rate intervention for Singapore using various methods of assessing de facto exchange rate regimes. In the main, we show that although the Singapore dollar is primarily influenced by the US dollar, in keeping with its de jure classification of a basket pegged regime, other major currencies, such as the yen and the euro, also impact the Singapore dollar. There is also evidence to indicate that Singapore uses the nominal effective exchange rate strategically as a policy instrument to satisfy domestic inflation objectives.

Suggested Citation

  • Tony Cavoli & Ramkishen S. Rajan, 2007. "Managing in the Middle: Characterizing Singapore's Exchange Rate Policy," Asian Economic Journal, East Asian Economic Association, vol. 21(3), pages 321-342, September.
    • Handle: RePEc:bla:asiaec:v:21:y:2007:i:3:p:321-342
    DOI: 10.1111/j.1467-8381.2007.00260.x
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    2. Alice Ouyang & Ramkishen Rajan & Tom Willett, 2008. "Managing the Monetary Consequences of Reserve Accumulation in Emerging Asia," Global Economic Review, Taylor & Francis Journals, vol. 37(2), pages 171-199.
    3. Cavoli, Tony, 2010. "What Drives Monetary Policy in Post-Crisis East Asia? Interest Rate or Exchange Rate Monetary Policy Rules," Journal of Asian Economics, Elsevier, vol. 21(5), pages 456-465, October.
    4. Quader, Syed Manzur, 2004. "Floating Exchange Rate Regime," MPRA Paper 26163, University Library of Munich, Germany.
    5. Ouyang, Alice Y. & Rajan, Ramkishen S., 2019. "The impact of financial development on the effectiveness of inflation targeting in developing economies," Japan and the World Economy, Elsevier, vol. 50(C), pages 25-35.
    6. Sok Heng Lay & Makoto Kakinaka & Koji Kotani, 2010. "Exchange Rate Movements in a Dollarized Economy: The Case of Cambodia," Working Papers EMS_2010_18, Research Institute, International University of Japan.
    7. Sidi Mohammed Chekouri & Abderrahim Chibi & Mohamed Benbouziane, 2022. "Identifying Algeria’s de facto exchange rate regime: a wavelet-based approach," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 11(1), pages 1-17, December.
    8. Tony Cavoli, 2006. "The Extent of Exchange Rate Flexibility in India: Basket Pegger or Closet US Dollar Pegger?," Working Papers id:424, eSocialSciences.
    9. Vu, Tuan Khai & Nakata, Hayato, 2018. "Oil price fluctuations and the small open economies of Southeast Asia: An analysis using vector autoregression with block exogeneity," Journal of Asian Economics, Elsevier, vol. 54(C), pages 1-21.

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