CASE STUDY OF SINGAPORE.

DESCRIPTION

• It attempts to give a perspective of Singapore`s exchange rate determination by integrating theory, econometrics and institutional realities

• Basically show us how external conditions, economic fundamentals and MAS intervention have affected the Singapore dollar.

• Singapore dollar was pegged to the pound sterling, and this parity to the pound was maintained through strict exchange controls.

• Parity was maintained until the devaluation of the pound in November 1967.

• This devaluation prompted the government’s decision to peg the Singapore dollar to the US dollar and gold.

• In 1972 following the floating of pound, the monetary authority of Singapore MAS …ver más…

b. The estimates are obtained by deflating the nominal effective exchange rate NEER using unit labour costs, rather than price levels.

c. The broad trends in the REER are similar to those of the NEER, except that the degrees of appreciation/depreciation of the REER are more pronounced.

Nominal effective exchange rate NEER: is not as good an indicator as the REER, because it doesn’t take relative price changes in account.

a. The NEER has been appreciating during the 80`, and has been followed by an appreciation of the nominal bilateral rate. This indicates the importance of the Singapore-US bilateral exchange rate.

b. The NEER and the US$/S$ rate have been a divergence during the early 80`, must be that the Singapore dollar was appreciating by more, relative to the other currencies in the basket than to the US dollar. In addition these two rates has converged during 85-86 and have tended to move together since 87.

c. Since 1991, bilateral rate has appreciated more rapidly than the NEER, and the explanation for this disparity is the same, some other currency in the NEER has tempered the appreciation in the US dollar.

Real bilateral exchange rate (US$/S$): Is an indicator of Singapore competitiveness, and in important