A CONSISTENT ESTIMATE FOR THE IMPACT OF SINGAPORE'S EXCHANGE RATE ON COMPETITIVENESS

Jang Ping Thia ()
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Jang Ping Thia: Ministry of Trade and Industry of Singapore, 100 High Street #11-01, The Treasury, Singapore 179434, Singapore

The Singapore Economic Review (SER), 2010, vol. 55, issue 02, 321-334

Abstract: Services form a larger part of the Singapore economy. However, it is difficult to analyze the exchange rate impact on services due to the lack of price data. Regression of output or export on exchange rate, while highly intuitive, is likely to suffer from the endogeneity problem since Singapore's exchange rate is used as a counter-cyclical policy tool. This results in inconsistent estimates. I propose a novel approach to overcome these limitations by using Hong Kong as a control for Singapore's economy to implement a pseudo "difference-in-difference" method, exploiting time variation in output, to achieve consistent estimates.

Keywords: Exchange rate; exports; endogeneity; E52; E41; C20 (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1142/S0217590810003742

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