Avoiding Double Mismatches and Withstanding Regional Financial Crises: The Singapore Experience

Abstract

By examining Singapore’s successful experience, this paper identifies policies and factors that can avoid or mitigate the borrowing dilemma of double mismatches of currency and maturity. The authors conclude that there are common core principles that could be adopted by other emerging economies, with modifications to reflect their local context and circumstances. Such core policies could include: (i) conservative prudential safe guards, such as higher capital adequacy ratios for banks; (ii) proper sequencing of financial development and spacing of domestic and external financial market liberalizations; and (iii) possibly a credible dichotomized financial system encouraged by reasonable fiscal incentives and management of foreign bank participation.