Inflation targeting in Singapore. Lessons for Ukraine

Keywords: inflation targeting, “Impossible Trinity”, management of exchange rate, interest rate control, the Taylor rule Singapore dollar nominal effective exchange rate (S$NEER)


Russian aggression in Ukraine posed a difficult task for Ukrainian monetary authorities. In order to keep stability of national currency exchange rate the National Bank of Ukraine (NBU) fixed the U.S. dollar exchange rate immediately after the start of the conflict. However, NBU acknowledged that it considers fixed exchange rate as an impediment to inflation targeting, which NBU has chosen as its policy for money and credit since 2014. The main aim of this article is to show that inflation targeting is possible under fixed exchange rate regime. Thus, the problem of policy choice for NBU is not so dramatic. Price stability is compatible with management of exchange rate in both practical and theoretical perspectives. In order to prove this thesis, we will look into Singapore’s experience of targeting inflation with fixed exchange rate.

Singaporean experience of managing its exchange rate proves that greater flexibility is possible in the context of monetary policy choice. Depending on a situation Singaporean central bank is able to “lean against the wind” and shift swiftly between the corners of “Impossible Trinity” allowing greater control over exchange rate and interest rate in a short-term time horizon. Furthermore, management of exchange rate is compatible with inflation targeting paradigm which is strongly advised for a small-open economy by international financial organizations such as IMF. Singaporean experience also proves that the reaction function of MAS is compatible with the Taylor rule. Eventually, Singaporean economy maintains price stability without committing its monetary policy to interest rate targeting exclusively.

Author Biography

Artem Gergun, Society of Financial Analysts

PhD in Philosophy, Ukrainian Society of Financial Analysts member


Branson, W. H. (1981). Monetary Stability and Exchange Rate Objectives in Singapore. В M. A. (ed.). Singapore University Press.

Caldentey, E. P., & Vernengo, M. (2020). The Historical Evolution of Monetary Policy in Latin America. В S. Battilossi, Y. Cassis, & K. Yago (ed.). Springer. doi:10.1007/978-981-13-0596-2_56

Chan, K. S., & Ngiam, K.-J. (1996). Currency Speculation and the Optimum Control of Bank Lending in Singapore Dollar: a Case for Partial Liberalization. IMF Working Papers. Accessed from

Chow, H. K. (2017). Domestic Liquidity Conditions and Monetary Policy in Singapore. В F. Rövekamp, M. Bälz, & H. G. Hilpert (Ed.). Springer.

Chow, H. K., Lim, G. C., & McNeils, P. D. (2014). Monetary regime choice in Singapore: Would a Taylor rule outperform exchange-rate management? Journal of Asian Economics, 30, 63-81.

Claassen, E. M. (1992). Financial liberalization and its impact on domestic stabilization policies: Singapore and Malaysia. ISEAS.

Eichengreen, B. J. (2001). From Bretton Woods to Bipolarity: Singapore and the World. Accessed from eichengr/reviews/singaporewilliamson.pdf

Goh, K. S. (2004). Wealth of East Asian nations. (L. Low, Ed.) Marshall Cavendish Academic.

Grenville, S. (2011). The Impossible Trinity and Capital Flows in East Asia. ADBI Working Paper. Accessed from

Heipertz, J., Mihov, I., & Santacreu, A. (2017). Working Paper Series The exchange rate as an instrument of monetary policy. Working Paper Series The exchange rate as an instrument of monetary policy. Federal Reserve Bank of St. Louis. doi:10.20955/wp.2017.028

Kapur, B. K. (2005). Capital Flows and Exchange Rate Volatility: Singapore's Experience. Capital Flows and Exchange Rate Volatility: Singapore's Experience, 37. NBER Working Paper Series. Accessed from

Khor, H. E., Lee, J., Robinson, E., & Supaat, S. (2007). Managed float exchange rate system: the Singapore experience. doi:10.1142/s0217590807002531

Krugman, P. R., & Obstfeld, M. (2003). International economics: theory and policy. Addison Wesley.

Lavoie, M. (2014). Post-keynesian economics: new foundations. Edward Elgar Publishing.

Lee, S.-Y. (1984). Some aspects of foreign exchange management in singapore. Asia Pacific Journal of Management, 1, 207-217. doi:10.1007/bf01733486

Lim, C. Y. (1988). Policy options for the Singapore economy. McGraw-Hill.

MAS. (2013). Monetary Policy Operations in Singapore. Monetary Policy Operations in Singapore. Accessed from

MAS. (2016). Singapore’s Monetary History: The Quest For A Nominal Anchor. Macroeconomic Review, 78-86.

MAS. (2018). Monetary Policy and the Economy. Economics Explorer Series, 1-21. Accessed from–Monetary-Policy-and-the-Economy.pdf

McCallum, B. T. (2006). Singapore's Exchange Rate-Centered Monetary Policy Regime and its Relevance for China.

Parrado, E. (2004). Singapore’s Unique Monetary Policy: How Does It Work? IMF Working Papers. Accessed from

Robinson, E. S., & Ito, T. (2001). Discussion of 'The Case for a Basket, Band and Crawl (BBC) Regime for East Asia'. В D. Gruen, & J. Simon (Ed.), Future Directions for Monetary Policies in East Asia. Reserve Bank of Australia. Accessed from

Roger, S. (2010). Inflation Targeting Turns 20. Finance and Development, 47.

Williamson, J. (1965). The crawling peg. Princeton/N.J. Accessed from

Williamson, J. (1998). Crawling Bands or Monitoring Bands: How to Manage Exchange Rates in a World of Capital Mobility. International Finance, 1, 59-79. doi:10.1111/1468-2362.00004

Williamson, J. (2001). The Case for a Basket, Band and Crawl (BBC) Regime for East Asia. В D. Gruen, & J. Simon (Ed.). (стр. 97-111). Reserve Bank Of Australia. Accessed from

Wilson, P. (2009). Monetary Policy in Singapore: A BBC Approach. В W. M. Chia, & H. Y. Sng (Ed.). World Scientific.

Yip, P. S.-L. (2005). The exchange rate systems in Hong Kong and Singapore: currency board vs monitoring band. Pearson Prentice Hall.

Abstract views: 41
PDF Downloads: 28
How to Cite
Gergun, A. (2022). Inflation targeting in Singapore. Lessons for Ukraine. VUZF Review, 7(2), 61-68.