An Exchange-Rate-Centred Monetary Policy System: Singapore's Experience

Abstract

Unlike most other countries, Singapore has adopted the use of the exchange rate rather than the interest rate as the instrument of monetary policy. The choice of the exchange rate is predicated on the Singapore economy’s small size and its high degree of openness to trade and capital flows. The basket, band and crawl features of the exchange rate system have served as an effective anchor of price stability, keeping inflation low and stable over the past 30 years. In addition, Singapore has complemented monetary policy with micro- and macroprudential measures to ensure overall price and financial stability in the economy.

Full publication: Market Volatility and Foreign Exchange Intervention in EMEs: What Has Changed?

Keywords: Singapore, monetary policy, exchange rate, macroprudential policies

JEL Classification: F31, E52, E58