The Uniqueness of monetary policy in Singapore

The Global Financial crisis

In August 2007 at the center of world economy, United States of America, the global financial crisis have begun. It started with credit crunch and liquidity crisis, when “the US sub-prime mortgage defaults began to rise and foreclosures increased.” (Sharma 2013, p.3) Year after the crisis had deepened since a big number of international markets depend on US economy. So, Global financial crisis corresponds for the largest decline in the world economy in our days. (McKibbin and Stoeckel 2009)

Consistently, crisis triggered country by country, advanced economies as well as developing have not escaped from the instability in financial systems and business cycles, declines in growth rates, increase in inflation and unemployment. In figure 1, the results of the crisis on some countries are shown. To be precise, from that figure we can see large declines in GDP growth rates and stock markets in 2008-2009. So, the crisis in the US spread very fast across the globe.

Figure 1: Reaction to the global financial crisis (Sharma 2013, 4)

Impact of the crisis on Singapore

Large declines in economic parameters were seen in trade-oriented countries, like Singapore. The reason for that is its trade balance, which is one of the main sources for economic growth in Singapore. As an explanation, Department of Statistics in Singapore (Lim, 2013) provides comparison table of GDP growth and total trade growth (Figure 2). In this figure, it is shown that the largest decline was in 2008-2009 in the middle of Global Financial Crisis. Singapore’s trade growth declined from 5 % in 2007 to approximately -7% in 2009, in other words it declined for 12% and even becomes negative. What is more, the dependence of GDP growth on trade gr...

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Government of Singapore. Trade with Major Trading Partners. 2013. http://www.singstat.gov.sg/statistics/visualising_data/visualiser/trade/trade.html (дата обращения: 2 February 2014 г.).

Lim, Regine. Singapore’s Merchandise Trade Performance, 2003 - 2012. Statistics Singapore Newsletter, Research & Statistics Division, International Enterprise Singapore, 2013.

McKibbin, Warwick J., и Andrew Stoeckel. «The Global Financial Crisis: Causes and Consequences .» Working Papers in International Economics 2.09 (November 2009).

Monetary Authority of Singapore. MAS Monetary policy statement. Monetary Authority of Singapore, 2010.

Sharma, Vicas. Global Financial Crisis: Impact on Sinagpore and Policy Measures Taken to Counter It. Frost & Sullivan, 2013.