Reserve Management and Motivations for FX Interventions

Unlike most central banks which target interest rates, Singapore runs an exchange rate-centred monetary policy framework, in which the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) is the intermediate target of monetary policy. The S$NEER fluctuates within a policy band that is calibrated to ensure medium-term price stability. The Monetary Authority of Singapore (MAS) undertakes foreign exchange intervention operations to ensure that the S$NEER stays within the policy band. In the process of monetary policy implementation, the central bank accumulates or expends official foreign reserves, leading to changes in the size of its balance sheet. As with other central banks, the MAS' main objective of holding reserves is to meet balance of payment needs, which underpin the effective implementation of monetary policy.Full Publication: "https://ssrn.com/abstract=3497854" Reserve Management and FX Intervention