Singapore’s unusual monetary arrangements have long included a currency board-type backing of domestic currency and a structural government surplus; it liberalised financially relatively early, tried exchange rate pegging but found it more efficient to vary the exchange rate to offset external inflationary pressures, and by 1986 this had become an idiosyncratic but systematic form of inflation targeting.
|Years||Targets and attainment||Classification|
|1974-75||currency floating, no other targets but concern with price stability; domestic financial liberalisation by mid-1975, with monetary operations moving from credit ceilings to rediscount facilities and reserve requirements; domestic currency backed by forex reserves as in currency board||loosely structured discretion LSD|
|1976-80||currency pegged to undisclosed basket (within undisclosed margins); full capital account liberalisation by 1978, active autonomous forex market; monetary policy operated via indirect instruments, increasingly forex swaps; government budgetary operations typically contractionary||loose exchange rate targeting LERT|
|1981-85||more active variation of exchange rate (in form of appreciation) to maintain confidence in currency and offset external inflationary pressures, but with eye to competitiveness and growth as well||loosely structured discretion LSD|
|1986-2017||active exchange rate control (with first deliberate depreciation 1986-7) is by now developing into a form of sui generis inflation targeting, where centre, path and width of exchange rate band are set at intervals in forward-looking way so as to maintain price stability (informal target generally understood as less than 3%); this monetary strategy becomes more formalised and more publicised over time, with gradual increases in transparency, e.g. direction of exchange rate movement announced in broad terms twice each year from mid-2001 (but neither exchange rate index nor exact centre, rate of crawl and width of band are published, nor is the formal inflation target); implied inflation targets exceeded 2008 and undershot 2009 and 2015-16, but otherwise met or near-met, and medium-term inflation expectations remain broadly anchored; government budgetary operations contractionary; monetary policy operated mainly through forex swaps, but also via government bond repos and direct borrowing/lending with banks||loose inflation targeting LIT|
Selected IMF references: RED 1975 pp23-6, 39-41; RED 1978 pp19-20; RED 1982 pp29-30, 48-9; SR 1982 pp11-12, 14; RED 1983 pp30-2; SR 1986 pp13-15; SBI 1994 pp40-2; SR 1994 p9; SR 1998 p8; SR 2000 pp6-7; SR 2002 p10-11; SR 2004 p14; SR 2007 p10; SR 2015 p8; SR 2016 p56; SI 2016; SR 2018 pp14-15.
Additional sources: Monetary Authority of Singapore (2001); Parrado (2004); Khor et al. (2004).
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