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OUR MISSION
OUR OBJECTIVES
 
ECONOMIC DEVELOPMENTS AND
MONETARY POLICY
D ECONOMIC DEVELOPMENTS AND MONETARY POLICY  
 
The World Economy: Robust Growth on  
the Strenght of the US Economy  
70
 
International Financial Markets: Resilience  
in the Face of Uncertainties
71
 
Singapore Financial System
 
Remains Sound  
74
 
Singapore Economy: Ending on a High Note  
74
 
Monetary Policy Amid Continued Growth  
and Emerging Inflationary Pressures  
77
 
Strengthening the Monetary Policy
 
Formulation Process  
77
 
Pushing the Frontier of Monetary Policy
 
Research and Analysis  
78
 
Box 16 – Assessing Market Response to  
MAS’ Monetary Policy  
79
 
  STRENGTHENING THE MONETARY POLICY FORMULATION PROCESS
 

MAS has over the years gradually shifted towards adopting a more open and communicative approach in monetary policy. We are devoting greater attention to communicating our objectives more clearly and frequently to the market, the media and the public. We are also revealing more information about our methodology and views, including information about our forecasting methods, the internal models and the impact of potential external shocks and policy changes. In July 2005 for example, we released a Staff Paper1, which documented the evolution of our macromodelling tools and techniques for economic forecasting and policy analysis since 1986.

MAS’ continued efforts to increase monetary policy transparency and communication appear to have paid off in terms of the alignment of market expectations to policy decisions. A recent study conducted by MAS staff found that market participants are better able to understand and anticipate monetary policy decisions and respond more efficiently to economic data and news, following MAS’ monetary policy transparency initiatives (See Box 16).

On the macromodelling front, the Monetary Model of Singapore (MMS) was reviewed and enhanced to strengthen MAS’ forecasting, policy analysis and decision-making capabilities. The MMS now includes the specification of a satellite model for foreign input prices, an exogenous variable in the model. We are also developing a demographic extension to the model. In addition, the MMS was updated early this year to incorporate the latest input-output data and the rebased national accounts.

1 The paper benefited tremendously from the contributions of our consultant, Chris Murphy (Ecotech).