Research Insights: What Valuable Lessons Can We Learn from Singapores Unique Monetary Framework?

This study introduces a novel monetary policy framework that positions the exchange rate as the central policy instrument, focusing on Singapore as a case study. The estimated changes in Singapores exchange rate coincide fairly well with actual deviations, and the estimated parameters are as predicted. These findings provide compelling evidence in support of the hypothesis that Singapores monetary policy can be characterized by a forward-looking policy rule that responds to both inflation and output volatility, particularly in times of economic crises.