FUNDAMENTAL ISSUES IN THE SINGAPORE FOREIGN EXCHANGE MARKET : AN ECONOMETRIC ANALYSIS

Abstract

As growth in Europe and the United States slows down, the Asia-Pacific region is predicted to be the centre of global economic activities in the coming decade. Singapore, given her strategic location and well-developed infrastructure, is poised to play an increasingly important role ill the future. A major area of concern is the ability of her financial sector to take advantage of these vast opportunities for trade and investment in the new world order, This academic exercise with its focus on the Singapore foreign exchange market is, therefore, a timely study. The study focuses on examining sever-al fundamental issues in the Singapore foreign exchange market. Specifically, we provide tests or purchasing power parity, interest rate parity and analyse econometrically the quality of the forward exchange rate for Singapore. Historically, these are among the fundamental issues in the international finance literature. For Singapore, the issues included in this study are pertinent to the efficiency of her foreign exchange market. The thrust of the study is emphical. The methodology adopted here includes the state-of-the-art econometric techniques. The study is made up of four self-contained chapters with a common theme, vis-a.-vis, behaviour of the exchange rate. The whole exercise is written in such a way as to allow readers to skip chapters without feeling a sense of discontinuity.