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As one of the most developed economies in Asia,  Singapore ’s success is built on an outward-looking growth model driven by exports, foreign investment and international financial flows. A key element in this externally oriented strategy has been the exchange rate policy. This paper looks, among others, at how  Singapore ’s “basket, band and crawl” exchange rate regime has helped it to manage short-term currency fluctuations and to redress currency misalignments with underlying economic fundamentals.
However, it is the very openness of the  Singapore economy which also renders it vulnerable to shocks originating abroad – and the present global financial crisis is no exception. As documented in this paper,  Singapore has experienced its sharpest economic downturn in over two decades as a result of the crisis. With exports plummeting, business confidence taking a hit and foreign portfolio capital exiting its equity markets, the economy contracted and unemployment climbed up.
The crisis has exposed the limitations of  Singapore ’s pronounced dependence on the external sector, a dependence which arises from a small domestic market marked by sizeable income and wealth inequalities. A more sustainable growth path would entail narrowing these disparities, this paper contends, as well as reducing reliance on industrial-country markets in favour of strengthened regional economic ties.
Publisher: TWN (ISBN: 978-983-2729-93-8), Year: 2010   No. of pages: 56
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