...A. DESAI MARK F. VEBLEN Exchange Rate Policy at the Monetary Authority of Singapore Dr. Khor Hoe Ee, Assistant Managing Director, Monetary Authority of Singapore (MAS), reviewed the year-end economic data for 2001. He had just met with a number of his colleagues and now paged through the statistics they had discussed. Dr. Khor wondered whether the monetary system that has served Singapore so well since the late 1970s—and had filled the void left by the collapse of the Bretton Woods currency system—was still the best model for Singapore to follow. Singapore’s managed float, sometimes referred to by journalists as a “dirty float,” stood in contrast to the systems used by some of its neighbors: Hong Kong had remained strongly committed to its peg against the U.S. dollar, and Australia had just recently shifted to a completely floating regime. A key item on the agenda for the Monetary Policy Committee meeting at the end of January was to review and set monetary policy in response to the changing economic environment. As head of the MAS’s Economics Department, Dr. Khor knew that he was responsible for recommending a policy response that would be consistent with Singapore’s strategy for sustainable economic growth with price stability as well as supporting Singapore’s role as a major global financial center. A great deal had happened in the domain of monetary policy in the last five years, much of which posed challenges for Singapore. Since the massive currency depreciations...
Words: 8507 - Pages: 35
...other countries savings to meet its local investment and consumption demands. In contrast, if a country has a negative capital and financial accounts, it will have a current account surplus - because the credit is more than the debit. It means that this country is using its saving for investing. In Singapore, the government is heavily managed the country’s economy. It promotes high levels of savings. Also, the Monetary Authority of Singapore focuses on accumulating foreign reserves. Consequently, Singapore became a net creditor to other countries. It has a large current account surplus and saving accumulation in excess of domestic investment demand, which lead to produce a long-term real appreciation of the SGD. 2. What is a real exchange rate? What determines real exchange rates in the long-run? Real Exchange Rate = Nominal Exchange Rate - Inflation It’s the ratio at which any country’s own currency is equivalent to other currencies in terms of purchasing power. It discounts inflation from the nominal interest rate. It also provides a better measurement of countries exchange rates. The Monetary Authority of Singapore focused mainly on inflation and didn’t use exchange rate as a competitive tool. Therefore, Singaporean...
Words: 1611 - Pages: 7
...What is monetary policy? Monetary policy is what central banks use to manage the supply of money in the economy. The money supply is the total amount of money, including cash, credit and money market mutual funds. The important part of money supply is credit, which includes loans, bonds, mortgages, and other agreements to repay. The size and rate of growth of the money supply are controlled by central banks, currency board or major regulatory boards, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or changing the amount of money banks need to keep in the bank reserves. For example, the Federal Reserves use contractionary monetary policy to offset the Federal Government's expansionary fiscal policy. Singapore’s monetary policy Singapore Dollar is the bedrock and the lifeline of this trade. Foreign companies wishing to purchase goods and services manufactured in Singapore will have to first purchase the SGD with their home currency and exchange SGD for goods and services. Because of this, Singapore currency is capable of floating freely and in which MAS( Monetary Authority of Singapore) will still continue to monitor the strength of SGD( Singapore Dollar) based on $SNEER(S$NEER is the Singapore Dollar Nominal Effective Exchange Rate). Thus, Monetary Authority of Singapore (MAS) is in charge of Singapore’s monetary policy in which it is also entrusted to promote monetary stability, and credit and exchange...
Words: 310 - Pages: 2
...last forty to fifty years Hong Kong and Singapore have gone from developing nations to industrialized nations with high standards of living. Hong Kong and Singapore have gone from an average gross domestic product per capita of $5,000 forty years ago to $50,000 per capita today. Several fiscal and monetary policies have contributed to the economic prosperity of these two countries. Strategies that have been used to encourage economic growth in Hong Kong and Singapore include economic policies that foster investment, entrepreneurship, risk taking, and innovation. These fiscal and monetary policies have allowed Singapore and Hong Kong to experience significant and rapid growth. Singapore and Hong Kong have implemented fiscal and monetary policies that encourage investment, entrepreneurship, risk taking, and innovation. Some of the policies implemented in the last forty years include open economic trade policies that favor exports and imports by limiting tariffs. Another economic strategy is that both Singapore and Hong Kong established themselves as trade hubs for their regions, as well as financial hubs for their regions. Because Hong Kong and Singapore are financial hubs they both have stock markets and strong banking sectors, which allows for capital investment to be readily available. Singapore and Hong Kong both have implemented very low tax rates for both personal tax rates and corporate tax rates. Low tax rates, combined with Singapore and Hong Kong having very transparent...
Words: 670 - Pages: 3
...The current rate of Singapore’s dollar against the United States’ dollar is 1USD=1.39SGD The Singapore dollar has depreciate slightly since recent months, with rates going to as high as 1USD=1.43SGD on 5th October. The exchange rate between the Sing dollar and the US dollar has been relatively stable since last year, May 2014 to Aug 2014. However, the exchange rate has been rising consistently since Aug 2014. The appreciation of the USD, or the depreciation of the Singdollar was due to a weaker Singdollar. The Monetary Authority of Singapore (MAS), which uses the exchange rate as its main monetary policy tool made a statement in January 28, mentioning that the Singdollar will be seeking a slower pace of appreciation against a basket of currencies. Given that US is likely to be a large trade partner of Singapore, the exchange rate between Singapore and US is thus likely to be affected. The strengthening of the USD due to signs of economy recovery, and a slower rate of appreciation of the Singdollar, has translated to a depreciation of the Singdollar since August last year. However, there was a reversal in trend in April this year, where the Singdollar strengthened and appreciated against the dollar. This reversal in trend could be due to the MAS decision in April to refrain from easing monetary policy further, which is likely to have increase investors’ confidence, and putting a stop on investors’ expectation of a weakening Singdollar. It is highly likely that the economic...
Words: 1238 - Pages: 5
...International Financial Management EF 5143 Dr. Du Du Student Name and SID: Li Xing, 53680125 Lin Lin, 53834131 Chen Shu, 53684900 Zhang Rui, 95651546 Abstract The dollar- linked exchange rate system in HK was put into operation in 1983 and was always regarded as the footstone of stabilizing HK economy since then. However, 30 years later, great changes both inside and outside have taken place in Hong Kong. Now, a series of economic and social problems associated emerge with the Hong Kong's present exchange rate arrangement- linking HKD to USD. Is the dollar-linked exchange rate system still suitable for HK? Will the Hong Kong monetary authority have other better choices? In order to resolve the above questions, our report was divided into four main parts to analyze and discuss this issue. First, we discussed the reasons for choosing dollar- linked and also the disadvantages of linking HKD to USD that we assessed both in theory and fact. Then, we focused on the potential benefits of HKD linked with CNY before we analyzed the disadvantages. Later, we talked about a larger issue – dollarization and compared HK with Switzerland and Singapore before we came to our conclusions that HK should give up existed linking exchange rate system and adopt managed floating arrangement. Keywords: Linked exchange rate system, Hong Kong dollar, United State dollar, Chinese Yuan, Dollarization 1 Contents 1. 2. Background......................................................................
Words: 4638 - Pages: 19
...effects of the financial crisis and the appropriate and necessary responses at national and international level. My focus will be based on Singapore. Singapore has a very open economy both in current and capital accounts. The impact of financial crisis in Singapore have not been that severe due to the strong macroeconomic fundamentals, policies, healthy financial domestic system and political stability. With the increased globalization and rising international capital flows, the determination of an appropriate monetary policy by countries with small economies have become more complex. An example of this country is Singapore. The government of Singapore has been faced by the challenge of evaluating the different economic developments which are vital in the short run and also assessing the different trade-offs among policy objectives. Identification of the key constraints on the operating regime and assessing the necessary degree of monetary policy transparency has really been a problem to the government. Based on this context, Singapore has been trying to adopt a unique monetary framework centered on managing the rate of exchange and promoting price stability to ensure sustainable economic growth. The monetary policies in Singapore are enacted by the Monetary Authority of Singapore (MAS). This body has time to time tried to ensure that the Singapore dollar remains strong in relation to other currencies. MAS is responsible for the central banking functions except currency...
Words: 256 - Pages: 2
...(a) Explain the possible internal and external factors that will influence inflation in Singapore. Demand-Pull Inflation (both internal and external factors) - Singapore is moving towards a more knowledge-intensive, service-based economy -> is becoming prime locale for high value-added industries -> investors seek to partake in these promising ventures -> strong inflow of FDI -> Increase in I - Increasing numbers of foreign talent are emigrating to Singapore and taking up permanent residence -> Increase in C, especially in major markets like the housing market and automobile market - Singapore is export-dependent -> any increases in export demand will have a major impact. Increases in export demand may be due to the Monetary Authority of Singapore adjusting its monetary policy to reduce the currency slope. All these factors lead to excessive growth in AD in relation to AS, beyond what Singapore's current potential output can support. This leads to bottlenecks in both the factor and product markets, causing costs of production and consumer prices to rise. The Singaporean economy is especially susceptible to demand-pull inflation as it is operating at full employment. Increase in AD from AD1 to AD2 causes the GPL to rise to OP2 with no increase in output. This results in demand-pull inflation as all available resources are already fully employed and real GNP is already at its maximum level. Firms begin bidding up factor rewards in order to increase...
Words: 1091 - Pages: 5
...effects of the financial crisis and the appropriate and necessary responses at national and international level. My focus will be based on Singapore. Singapore has a very open economy both in current and capital accounts. The impact of financial crisis in Singapore have not been that severe due to the strong macroeconomic fundamentals, policies, healthy financial domestic system and political stability. With the increased globalization and rising international capital flows, the determination of an appropriate monetary policy by countries with small economies have become more complex. An example of this country is Singapore. The government of Singapore has been faced by the challenge of evaluating the different economic developments which are vital in the short run and also assessing the different trade-offs among policy objectives. Identification of the key constraints on the operating regime and assessing the necessary degree of monetary policy transparency has really been a problem to the government. Based on this context, Singapore has been trying to adopt a unique monetary framework centered on managing the rate of exchange and promoting price stability to ensure sustainable economic growth. The monetary policies in Singapore are enacted by the Monetary Authority of Singapore (MAS). This body has time to time tried to ensure that the Singapore dollar remains strong in relation to other currencies. MAS is responsible for the central banking functions except currency...
Words: 256 - Pages: 2
...effects of the financial crisis and the appropriate and necessary responses at national and international level. My focus will be based on Singapore. Singapore has a very open economy both in current and capital accounts. The impact of financial crisis in Singapore have not been that severe due to the strong macroeconomic fundamentals, policies, healthy financial domestic system and political stability. With the increased globalization and rising international capital flows, the determination of an appropriate monetary policy by countries with small economies have become more complex. An example of this country is Singapore. The government of Singapore has been faced by the challenge of evaluating the different economic developments which are vital in the short run and also assessing the different trade-offs among policy objectives. Identification of the key constraints on the operating regime and assessing the necessary degree of monetary policy transparency has really been a problem to the government. Based on this context, Singapore has been trying to adopt a unique monetary framework centered on managing the rate of exchange and promoting price stability to ensure sustainable economic growth. The monetary policies in Singapore are enacted by the Monetary Authority of Singapore (MAS). This body has time to time tried to ensure that the Singapore dollar remains strong in relation to other currencies. MAS is responsible for the central banking functions except currency...
Words: 256 - Pages: 2
...accumulation * History of Foreign Exchange Reserves * Adequacy and Excess reserves * List of countries by Foreign Exchange Reserves * New Realities of Forex Reserves and Management * Conclusion * Reference SIGNIFICANCE OF FOREIGN EXCHANGE RESERVES Introduction Foreign-exchange reserves (also called forex reserves or FX reserves) are assets held by central banks and monetary authorities, usually in different reserve currencies, mostly the United States dollar, and to a lesser extent the euro, the United Kingdom pound sterling, and the Japanese yen, and used to back its liabilities, e.g., the local currency issued, and the various bank reserves deposited with the central bank, by the government or financial institutions. Deposits of a foreign currency held by a central bank. Holding the currencies of other countries as assets allow governments to keep their currencies stable and reduce the effect of economic shocks. The use of foreign exchange reserves became popular after the decline of the gold standard. Definition In a strict sense, foreign-exchange reserves should only include foreign currency deposits and bonds. However, the term in popular usage commonly also adds gold reserves, special drawing rights (SDRs), and International Monetary Fund (IMF) reserve positions. This broader figure is more readily available, but it is more accurately termed official international reserves or international reserves. Foreign Exchange reserves are called Reserve...
Words: 7085 - Pages: 29
...Introduction Singapore is an economically well-developed country; it enjoys a remarkably open and corruption free environment, stable price and a GDP per capita that is higher than most developed countries. Singapore depends heavily on exports, particularly in technology and biomedical, and services provide the main source of revenue for its economy. Singapore has attracted major investments in pharmaceuticals and medical technology production and will continue to establish itself as Southeast Asia’s financial and high tech hub. A Production Output Performance Analysis, Labour Market Analysis and Price Level Analysis will be provided from the viewpoint of Singapore’s economy to assess the performance trends over the past 10 years and what measures Singapore government has taken to achieve such performance. Production Output Performance Analysis The graph above shows Singapore GPD at constant prices The graph above shows Singapore GDP annual growth rate The graph above shows Singapore GDP per capita based on PPP Singapore has strong economic growth since 2004 after adapting to several shocks which include the global economic slowdown in 2001, the outbreak of SARS and the Iraq war in 2003, which affect tourism badly Singapore has a GDP growth of average 8.6% from 2004-2007. The economy contracted 0.6% in 2009 due to financial crisis, but rebounded 15.2% in 2010 on the strength of renewed exports, before slowing to 6.0% in 2011, 2.5% in 2013 and 3.8% in 2013, largely due...
Words: 1074 - Pages: 5
...Monetary Policy in Vietnam: Alternatives to Inflation Targeting Le Anh Tu Packard (tu.packard@gmail.com) Fifth Draft July 2007 Paper prepared for the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst with support from the United Nations Department of Economic and Social Affairs (UNDESA). Earlier versions of this paper were presented to the May 2005 CEDES/Amherst Research Conference in Buenos Aires and the July 2005 Da Nang Symposium on Continuing Renovation of the Economy and Society. Financial support for this project has been provided by the Ford Foundation, UNDESA, and the Rockefeller Brothers Foundation. My gratitude and thanks go to two anonymous referees, Gerald Epstein, Erinc Yeldan, Jaime Ros, Lance Taylor, Per Berglund, and Phillipe Scholtes for their insightful comments and valuable ideas, and also to numerous colleagues in Vietnam including Dang Nhu Van for their helpful feedback. I am responsible for all remaining errors and omissions. List of Acronyms and Abbreviations ASEAN BFTV BIDV CEPT CIEM CMEA CPRGS DAF FDI FIE GC GDI GDP GNP GSO HDI IMF JV NEER ODA PE PER PRGF PRSC RCC REER ROSCA SBV SOCB SOE UCC UNDP VCP VLSS WTO Association of South East Asian Nations Bank for Foreign Trade of Vietnam Bank for Investment and Development of Vietnam Common Effective Preferential Tariff Central Institute for Economic Management Council of Mutual Economic Assistance Comprehensive Poverty Reduction and Growth Strategy Development...
Words: 10004 - Pages: 41
...Introduction: The Republic of Singapore was known as a thriving British trading port back in 1819. She then merged with Malaysia in 1963, but was expelled from the federation in 1965. Singapore, without natural resources, was doomed to fail in eye of neighbouring nations. But has transformed from third to first world standards in a very short period of time. Singapore also became one of the world’s most affluent nations with important trading links such as one of the busiest ports in the world and best airport infrastructure in the world for years running. Singapore’s GDP per capita is comparable to first world European nation’s counterparts as well. Singapore’s economy is largely dependent on exports, some examples are IT-related, user electronics products, pharmaceuticals, and financial services industries. For instance, the republic has one of highest volume in export refineries around the globe, oil exports accounted about 68.1m tons in 2007. The O&G industry accounted for 5% of Singapore’s GDP as well. (Economic Development Board, n.d). According to Strait Times: Singapore secured position as the second freest economy in the world in 22 straight years, the acceptance to global trade & investment remains to contribute a sturdy support for economic dynamism in Singapore. One of the key events happened past decade in Singapore is the collapse of Lehman Brothers that leads to financial crisis in 2008. The Republic takes the lead among the East-Asian countries...
Words: 2240 - Pages: 9
...TABLE OF CONTENTS 1. INTRODUCTION ……………………………………………………………………………. 4 2. PROPERTY BUBBLES IN HONG KONG ………………………………….…………….. 5 INFLATION AND INFLATION RATE IN HONG KONG ……………………………….. 10 3. CONCLUSION…………………………………………………………………………18 4. REFERENCES ……………………………………………………………………………..19 5. APPENDICIES …………………………………………………………………………..... 20 Appendix 1 ………………………………………………………………………………… 20 Appendix 2 ………………………………………………………………………………… 21 Appendix 3 ………………………………………………………………………………… 22 Appendix 4 …………………………………………………………………………………23 Appendix 5 ………………………………………………………………………………… 24 Appendix 6 ………………………………………………………………………………… 25 INTRODUCTION Resources and scarcity are the basic elements and tenet of economics, so resources and scarcity are related to human wants and desires. Money and time are the most constantly for the resources and scarcity which are the allocation from the resources and impacting the economically efficiency. Hong Kong has been enjoyed as one of the four dragons in Asia for 30 years with the rapid growth of economy worldwide and globalization, but she also suffers from the worldwide downside of economy due to the poor fundamental and lack of long–run strategies that trigger the existing difficult situation. There have many issues and challenges threatening Hong Kong economy recently, we analysis and evaluate two important problems, (1) Property bubbles in Hong Kong...
Words: 4128 - Pages: 17
