Does Credit Channel Matter in the Conduct of Monetary Policy in Singapore?

Wai-Ching Poon

The IUP Journal of Monetary Economics, 2008, vol. VI, issue 3, 40-50

Abstract: This paper employs the bounds testing approach for cointegration analysis (Pesaran et al., 2001) to examine the impact of interest rate and exchange rate on output, and then uses the estimated weights to construct Monetary Conditions Index (MCI) for Singapore over the quarterly period 1981-2004. Designed to measure the stance of monetary condition, MCI plays an important role for the conduct of monetary policy. Results reveal evidence of a long-run cointegration between the output and its determinants, namely short and long-term interest rate, exchange rate, and claims on the private sector. This has further verified the stability of the Singaporean output demand function. The study has evidently showed that the Monetary Authority of Singapore has responded positively to the MCIs in terms of the monetary policies stance.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjmo:v:06:y:2008:i:3:p:40-50

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