This website uses cookies to ensure you have the best experience. Learn more

The Uniqueness Of Monetary Policy In Singapore

1072 words - 5 pages

The Global Financial crisis
In August 2007 at the center of world economy, United States of America, the global financial crisis have begun. It started with credit crunch and liquidity crisis, when “the US sub-prime mortgage defaults began to rise and foreclosures increased.” (Sharma 2013, p.3) Year after the crisis had deepened since a big number of international markets depend on US economy. So, Global financial crisis corresponds for the largest decline in the world economy in our days. (McKibbin and Stoeckel 2009)
Consistently, crisis triggered country by country, advanced economies as well as developing have not escaped from the instability in financial systems and business cycles, ...view middle of the document...

Therefore, since USA was in the list of major trading partners of Singapore, country’s economy was affected significantly by the American crisis. So, it can be concluded that large amount of the impact of crisis was due to trade volatility.

Figure 2: Singapore’s merchandise trade and GDP in nominal terms, 2003-2012 (Lim 2013)


Figure 3: Trade with Major Trading Partners (Government of Singapore 2013)

Monetary policy response
In order to return economy to its stable path Singapore’s government have implemented different policies, such as fiscal policy, banking and financial sectors’ programs, and monetary policy. The uniqueness of monetary policy in Singapore is that the key instrument of monetary system is Net Effective Exchange Rate (NEER). So, by changing NEER the government can stimulate economy. To be precise, during economic recessions and crisis NEER is lowered by Monetary Authority of Singapore (MAS), conversely, during the period of prosperity and high growth, NEER is increased. Therefore, during the global financial crisis it was expected that NEER would be lowered by Singapore’s government.
The first step of Monetary Authority of Singapore was taken in April 2008. At that time the effects of Global Financial crisis had not yet reached Singapore’s economy (ASEAN 2013). Despite the coming crisis, MAS decided to continue its previous path of gradual appreciation of the national currency. In figure 4 it can be seen that in April 2008 NEER was re-centered, so its index was returned to 100. So, MAS was confident in Singapore’s dollar and did not allow it to depreciate.


Figure 4: NEER changes in 2008-2010 (Monetary Authority of Singapore 2010)
The next monetary policy statement in October 2008 announced the shifting of NEER to neutral bias (Sharma 2013). In other words, MAS suspended currency appreciation path in the context of the crisis, NEER was appreciated at zero rates. At the end of 2008, these measures helped “to soften the blow and instill confidence among local exporters” (Sharma 2013). However, according to ASEAN report (Country report of the ASEAN Assessment on the Social Impact of the Global Financial Crisis: Singapore 2013, 1), in 2009 when crisis was sharpened, additional measures were needed to be considered. Thus, in April 2009 MAS change the proportion of Singapore’s dollar in the basket...

Find Another Essay On The Uniqueness of monetary policy in Singapore

PUBLIC HOUSING POLICY IN SINGAPORE Essay

995 words - 4 pages Board (HDB) to tackle post war economic problems such as rapid population growth, high unemployment rate and a critical shortage of sanitary housing (HDB, 2014). The policy was also aimed to mitigate social problems such as riots and strikes among the different ethnic groups (HDB, 2014). The success story of public housing policy implementation lies in the higher economic growth and social stability of Singapore. Economic growth saw 82% of the

Monetary Policy in Switzerland: Applying The Mundell-Fleming Model

1289 words - 6 pages attempted to pursue all three options, by continuing an expansionary monetary policy after adopting an exchange rate floor of 1.20 CHF per euro (IMF, 2013, p. 5). In theory, this policy should be rendered ineffective given Switzerland’s perfect capital mobility and its fixed exchange rate system (Mundell, 1963, p. 484). Nevertheless, Swiss real GDP still increased between the implementation of the floor in 2011 and the termination of the monetary

Opposing Views of the Effectiveness of Monetary Policy

1486 words - 6 pages point out situations in which monetary policy may not work at all. On the other hand, some economists swear by monetary policy as one of the most influential economic tools. These economists show that controlling money supply in America is a relatively young idea, and is developing rapidly. They also attempt to show that money supply affects many variables in our economy, and that it is useful in more situations than the anti-monetary policy

MONETARY POLICY: FINDING THE RIGHT DEGREE OF TRANSPARENCY

2116 words - 9 pages individuals or entities in a position of vulnerability. However, it can be compared to a negotiation, where one holds information (such as their reservation price) in order to get a better offer; which represents a socially acceptable and practiced behavior. One way to reduce this incentive effect would be to make all the information available to all actors, or in other words, to higher the transparency vis–à–vis the monetary policy applied by the Central

Independent Bank of England, Essay topic: Significance of the Indpendent Monetary Policy Comitee in the U.K. over the nation's economy

839 words - 3 pages that result from the decisions that it makes.In 1997, the power to set interest rates in the United Kingdom was given to a new Monetary Policy Committee (the MPC). Few decisions have as much macro-economic effects as the level of short term interest rates. Currently, the government sets the inflation level targets, and the MPC sets the interest rates to meet that target. The objectives of the independent Bank of England were explained in the 1998

Monetary and Economic Policy in Latvia

920 words - 4 pages is no need for a currency war; simply implementing monetary policies that will be suitable for our economic situation should benefit everyone in the long-run. I. The possibility of a currency war means that the value of the currency increases and decreases according to market forces. Balance of payments is a brief of international transactions based on statistics. These transactions are the transferring of ownership of goods that have

Monetary Policy of a Central Banking System

1594 words - 6 pages expansionary monetary policy is targeted at increasing the money supply through lowering interest rates with the hope of increasing consumption and investment through easing credit; it is used to combat unemployment in periods of recession. A contractionary policy however is used to decrease money supply by increasing the interest rate; it is intended to slow down inflation. Monetary policy has been an area with lots of economic research in several

A Review of First Monetary Policy Overburdened

1773 words - 7 pages ; and developed his arguments using four typical economies, US, Japan, UK and Euro area. He claimed that especially after the GFC, monetary policy is compelled to achieve these goals which are beyond its traditional responsibility with the end result of compromising its independence and credibility, hence diminishing its effectiveness in achieving its primary goal of price stability. Price stability via Inflation targeting (IT) was emphasised

A Review of 'Is Monetary Policy Overburdened?'

1839 words - 8 pages using four typical economies, US, Japan, UK and Euro area. He claimed that especially after the GFC, monetary policy is compelled to achieve these goals which are beyond its traditional responsibility with the possible end result of compromising its independence and credibility, thus diminishing its effectiveness in achieving its primary goal of price stability. Price stability by Inflation targeting (IT) was emphasised to be the only objective

Historical Evaluation of the Bank of Canada and the Monetary Policy

1147 words - 5 pages . Originally, it was a privately owned company, and three years after its opening in 1938, the Bank of Canada became a crown corporation when the Canadian government purchased all of its shares. The Bank of Canada’s purpose was to protect the financial well-being of Canada, and it still to this day manages all monetary policy. The point of the Bank of Canada managing the monetary policy is to keep inflation rates stable and as low as possible . The

This essays talks about how the monetary policy is used by Federal Reserve in America

1022 words - 4 pages The monetary policy is an important policy because it controls the country economy. In America the monetary policy is control by the Federal Reserve. Using the tools of the monetary policy, the Federal Reserve can affect the volume of money and credit and their price interest rates in America. So therefore the Federal Reserve influences employment, output and the general level of prices.It is important that the Federal Reserve use the monetary

Similar Essays

Integration In The Eu And Monetary Policy

2438 words - 10 pages Integration in the EU and Monetary Policy The creation of the European Union (EU) is a great political and economic feat. For it is the ultimate sign of cooperation between nations that had been in constant rivalry before. Nevertheless, the ideals of such a union cannot stand alone without having a strong foundation and continuos rational decision making by all of the actors involved. If we assume that the European Central Bank’s (ECB

Conflicts In Monetary Policy Essay

815 words - 3 pages can determine the economy's average rate ofinflation, some commentators--and some members of Congress as well--haveemphasized the need to define the goals of monetary policy in terms of pricestability, which is achievable.One kind of conflict involves deciding which goal should takeprecedence at any point in time. For example, the government needs to becareful to avoid letting short-run temporary successes in preventingemployment losses during

Monetary Policy In Australia Essay

1712 words - 7 pages Monetary Policy is a macroeconomic policy that is concerned mainly with the actions of the Reserve Bank of Australia on behalf of the government to manipulate the cash rate, thus influencing the cost and availability of money in the economy, to affect the level of aggregate demand. The primary goal of the Monetary Policy is to achieve price stability by ensuring that inflation as measured by the CPI stays within the target range of 2-3% on

The Uniqueness Of Malaysian Culture Essay

1004 words - 4 pages INTRODUCTION As the son of a former career diplomat I have enjoyed the privilege of having lived in and visited many different countries during my life. I have seen and experienced the open-mindedness and love of personal liberty of America and Australia, the friendliness and community spirit of Canada, the conservatism and religion-oriented views of Saudi Arabia and Iran, and the growing economy and civic consciousness of Singapore. Malaysia