As Dr Goh explained: “in 1981 there was a clearer recognition that the way to beat inflation is to have a strong Singapore dollar”. Internationally too, a hard currency was an important sign that the Singapore Government pursued a disciplined economic policy, and that Singapore was different from the many developing countries which chronically outspent their revenues and depreciated their currencies. At the same time, a new international consensus on monetary policy had emerged with a greater awareness of the costs of inflation. The notion that mild inflation might be good for growth had been debunked by the experience of industrial countries in the 1970s. Instead, the industrialised countries  BIS Review 67/2001  1  with the lowest inflation such as Germany and Switzerland, had experienced the lowest unemployment rates. The simple Philips Curve, which implied a trade-off between inflation and unemployment, went out of fashion. In line with our emergence as an international financial centre, we progressively dismantled exchange controls in the 1970s, until the last restriction was removed in 1978. The absence of exchange or capital controls made the conduct of an exchange rate centred monetary policy that much more difficult. Our small and open economy was especially vulnerable to sharp swings in the exchange rate or speculative attacks. We could not afford to assume that speculation in international financial markets was invariably self-stabilising, and that speculators who bet wrongly against the Singapore dollar would automatically be punished. Therefore, MAS maintained an explicit policy of not encouraging the internationalisation of the Singapore dollar.

Lee Hsien Loong: Credibility, confidence, dynamism: MAS in the new economic and financial landscape Address by Mr Lee Hsien Loong, Deputy Prime Minister of Singapore and Chairman of the Monetary Authority of Singapore, at the MAS 30th Anniversary Conference, Singapore, 20 July 2001. *  *  *  Introduction It is a great pleasure for me to welcome you to MAS’ 30th Anniversary Conference. We are honoured to have with us so many distinguished central bankers, financial supervisors, market participants and economists. A new economic and financial landscape is emerging. Financial markets are becoming globalised; cross-border capital flows are larger and faster; financial institutions are consolidating and restructuring on a massive scale; and new and complex financial products are emerging, driven by technology and market pressures. Amidst these upheavals, MAS’ goals as a central bank remain unchanged: low inflation for sustained economic growth, and a sound financial sector for markets to grow and thrive. MAS is a unique organisation – it is the only institution in the world that combines responsibility for monetary policy with supervisory oversight of the entire financial sector – banking, insurance and securities. In addition, it has the task of promoting the development of Singapore as an international financial centre. I shall describe how MAS has met its responsibilities in these three areas over the past 30 years, some of the key events that have shaped our policies, and how we intend to move forward in the new economic and financial landscape.