Singapore's unique monetary policy

This IMF Working Paper looks at the Monetary Authority of Singapore and the way it conducts monetary policy. Instead of relying on short-term interest rates or monetary aggregates as its monetary policy instrument it conducts policy by managing the trade-weighted exchange rate index (TWI).

This paper investigates how this operating procedure actually works. For empirical purposes, it assumes the authorities follow a reaction function that aims the TWI at stabilizing expected inflation and

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