Journal article

Monetary regime choice in Singapore: Would a Taylor rule outperform exchange-rate management?

HK Chow, GC Lim, PD McNelis

Journal of Asian Economics | Published : 2014

Abstract

A DSGE-VAR approach was adopted to examine the managed exchange-rate system at work in Singapore and to ask if the country had any reason to fear floating the exchange rate and adopting a Taylor rule. The results showed that, in terms of overall inflation volatility, the exchange rate rule had a comparative advantage over the Taylor rule when export-price shocks were the major sources of real volatility while a Taylor rule was preferable when domestic productivity shocks were dominant. The exchange-rate rule also dominated the Taylor rule for reducing inflation persistence. © 2013 Elsevier Inc.

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