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

Hwee Kwan Chow (), Guay Lim () and Paul McNelis ()

Journal of Asian Economics, 2014, vol. 30, issue C, 63-81

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.

Keywords: Inflation targeting; Taylor rule; Exchange-rate management; DSGE–VAR estimation (search for similar items in EconPapers)
JEL-codes: E52 E62 F41 (search for similar items in EconPapers)
Date: 2014
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