A SMALL MONETARIST MODEL FOR SINGAPORE

Abstract

Monetarism has developed for about thirty years since its origination in the Chicago School during the late 50's and much research in this area has been done, especially in the United States and the United Kingdom. However, no one has yet to devise a monetarist model for Singapore. Our negligence in this field of studies inspires the existence of this exercise. To be exact, the objective of this exercise is to explain how changes in the rate of money supply affect real income and prices over time. It is found that the monetarist model does not apply to the case of Singapore as neatly as that of the United States. The openness of our economy, the emphasis of building our city state into an international financial centre, coupled with various institutional setups, all violate the monetarist assumptions. Our economy is so vulnerable to external influences that, perhaps, only a unique model, one that is free from western economic theories, will be able to explain ourselves adequately. Chapter Five gives the results of the findings and Chapter Six proposes various possible areas that we need to look at in future modelling exercises. Better alternatives are suggested.