Perpustakaan Digital ITB

This research is to study the correlation among Consumer Price Index (CPI), currency exchange rate between Singapore Dollar and US Dollar (SGD/USD), and Singapore Overnight Rate Average (SORA) from year 2012 to 2023 in Singapore. In recent years, Singapore has experienced high inflation rates and slow economic growth, raising questions about the effectiveness of the float exchange rate system adopted by Monetary Authority of Singapore (MAS) in achieving their objectives. The analysis method adopted in this study are Unit Root Test, Co-integration Test, Impulse Response Function (IRF), and Variance Decomposition. According to the Vector Error Correction Model (VECM) specification, production function primarily facilitated short-term adjustments towards long-term equilibrium, but these adjustments were gradual, taking more than 2 years to respond to system shocks. Analyses of IRF and Variance Decomposition indicated that alterations in variables resulted in analogous behaviour patterns, with notable effects primarily differing in terms of their response to shocks. The empirical evidence provides the support of inflation control are more sensitive to interest rate adjustment in Singapore. The findings of the present research provide valuable insights and numerous important implications for the macroeconomic evaluation of Singapore.