Exchange Rate Targeting as a Monetary Policy Alternative to Interest Rate Targeting - Tan, Shin Eik; Taylor, John B.; Stanford University, Department of Economics (Stanford University, Department of Economics, Honors Theses, 2008)
This paper examines the use of exchange rates as an instrument in attaining monetary policy objectives, as has been practiced in Singapore since 1981. Our basis for comparison is interest rate targeting. We present a model of the economy and examine the performance of “Taylor rule”-styled interest rate and exchange rate rules in stabilizing macroeconomic variables. We conclude that exchange rate targeting does confer considerable benefits to a small open economy that is highly dependent on trade, but these advantages diminish or disappear entirely for a less trade-dependent economy.
Tan, Shin Eik. (2008). Exchange Rate Targeting as a Monetary Policy Alternative to Interest Rate Targeting. Stanford Digital Repository. Available at: https://purl.stanford.edu/gs545wv1838
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Keywords: thesis; Stanford Department of Economics; exchange rates; monetary policy; Taylor rule