Mr Lim gives a policymaker’s perspective on the role of macroeconomic modelling in public policy  Opening remarks by Mr Lim Hng Kiang, Member of the Board of Directors of The Monetary Authority of Singapore and Minister for Health and Second Minister for Finance, at the launch of The Monetary Authority of Singapore’s new macroeconometric model of the Singapore economy, the Monetary Model of Singapore (MMS) on 2 February 2000. *  *  *  Introduction It is my pleasure to be here today. This conference provides an excellent opportunity for networking and the exchange of ideas between policymakers, private sector economists as well as academics. Last July, at the Far Eastern Meeting of the Econometric Society in Singapore, I mentioned that the Economics Department of MAS was working on a new macroeconometric model of the Singapore economy, the Monetary Model of Singapore. This model incorporates the latest techniques and thinking in modelling. I am glad that the development work is completed and the model is now ready to be used for policy work. The staff of the Economics Department will be presenting the details of the model later this morning for review and discussion. Post-Asian crisis: a time for reflection The economic outlook for Asia has turned positive. Memories of the Asian financial crisis and of the economic recession that followed have already started to fade. The crisis Asian economies are recovering - we see production, exports and consumption growth rebounding, some even surpassing pre-crisis levels.

Risks  In the last part of my presentation, I would like to talk about the risks with respect to the inflation outlook in the upcoming period and provide some information pertaining to the probable monetary policy strategy should these risks materialize. The fact that inflation will remain elevated for some time warrants the close monitoring of price setting behavior. The combination of several unfavorable developments, such as  unprocessed food and oil price increases, administered price hikes and base effects has led to a significant increase in inflation since the last quarter of 2009. Although these factors are temporary, they cause headline inflation to significantly exceed the inflation target, leading to an adverse impact on inflation expectations. Apart from items that are directly affected by cost push effects, current pricing behavior does not reveal any deterioration to the extent that might endanger the achievement of medium-term targets. However, I would like to remind you that monetary tightening may be implemented sooner than envisaged in the baseline scenario, should inflation expectations continue to rise and lead to a deterioration in general price setting behavior. Although downside risks regarding global economic activity have been decreasing, they remain a concern. Rising budget deficits and ongoing problems in credit, real estate and labor markets across developed economies continue to pose downside risks for the recovery in global activity. Should the global conditions deteriorate again, and consequently delay domestic recovery, the policy rate may remain constant for a longer period than envisaged under the baseline scenario.