Singapore Case Study

Brian Carr Matt Vitelli Rick Vazza 4/5/2011 capital of Singapores Monetary System In an ideal world, the Monetary Authority of Singapore would like to have a fixed exchange place, leave office capital mobility, and individual economic polity. However, all countries suffer from the fiendish trinity which allows a country to only control 2 of the three policies; the MAS has control over free capital mobility and an independent economic policy in terms of their exchange rate policy. The MAS has defined four objectives that they feel the exchange rate policy should achieve: limit ostentation to around 2%, cover unemployment in line with the non-accelerating inflation rate of unemployment, keep salary on pace with productivity, and maximize economic growth piece maintaining flexibility to absorb shocks. The first objective is limiting inflation; the Monetary Authority feels that the maximum threshold of inflation should be around 2%. With Singapores heavy creed on grapple the price of goods is especially importationant for the winner of the economy, Singapore needs to rely heavily on trade overdue its small size and lack of natural resources; of all(prenominal) GDP clam 70 cents was found on outdoor(a) demand, and 57 cents stemmed from imports.

With a currency basket imperturbable of the currencies of Singapores major trading partners the basket was weighed based on the proportion to how much imports and exports was sourced from or destined to a particular country. As a result, Singapore was susceptible to import inflation, any slide in value of the Singapore dollar meant that prices of imported goods were higher, raising the Consumer Price Index. Also, any rise in foreign prices lowered the purchasing power of local currency. due(p) to an increase in inflation exports would decrease and imports would increase. Thus change magnitude inflation would make the high valued goods and services produced in Singapore less attractive and the economy would suffer due to lower prices and decreased demand. In... If you want to get a in full essay, order it on our website: Orderessay

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