Currency Speculation and the Optimum Control of Bank Lending in Singapore Dollar: A Case for Partial Liberalization

Author/Editor:

Kenneth S. Chan ; Kee Jin Ngiam

Publication Date:

August 1, 1996

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The Monetary Authority of Singapore (MAS) has a long-standing policy of controlling bank lending in Singapore dollars to nonresidents and to residents who use the funds outside Singapore. While the control may prevent the internationalization of the Singapore dollar and contain exchange rate volatility, it can hinder the deepening and widening of the financial markets in Singapore. This paper suggests three policy options that would allow traders and investors to borrow Singapore dollars without any restrictions, while making it costly for speculators since their activities can cause exchange rate volatility which arguably imposes external costs to society.

Series:

Working Paper No. 1996/095

Subject:

Bank credit Banking Currencies Currency crises Exchange rates Financial crises Financial institutions Foreign exchange Loans Money

English

Publication Date:

August 1, 1996

ISBN/ISSN:

9781451950472/1018-5941

Stock No:

WPIEA0951996

Pages:

34

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