Lecture series
Monetary frameworks in ASEAN: rates, exchange rates and dollarisation
Southeast Asian economies anchor their money in different ways: with an inflation target and a policy rate, through the exchange rate, by tying the currency to another one, or while much of the economy runs in US dollars. This course explains each framework, how to tell which one a market uses, and what it means for the rates, currencies and liquidity a lender works with. Five lessons.
5 of 5 lessons published. Lesson 1 is free to read.
Listen to this course
Now playing
Press play to start
- 01Three ways to anchor money: an inflation target, the exchange rate or another currencyEvery monetary system needs something that holds the value of money steady. Some central banks in Southeast Asia announce an inflation target and steer a policy rate; Singapore manages its exchange rate; Brunei ties its dollar to Singapore's; in Cambodia, the wide use of US dollars limits what policy can do. The framework shapes the interest rates and currency risks a lender faces.
- 02Inflation targeting in ASEAN: targets, bands and open lettersThailand, the Philippines and Indonesia anchor their money with a public inflation target. In each, the government takes part in setting the target, the central bank steers a policy rate to reach it, and the target comes with a band or range. In Thailand and the Philippines, the central bank must also explain in an open letter when inflation strays outside it.
- 03Steering through the exchange rate: Singapore's band and Brunei's currency boardSingapore does not set a policy interest rate. Its central bank lets a trade-weighted value of the Singapore dollar move inside a band and changes the band's slope, level and width. Brunei goes further: its dollar is pegged to the Singapore dollar at par and fully backed by foreign reserves. Hong Kong and Denmark use comparable fixed arrangements against a single currency.
- 04Dollarisation: when much of the economy runs in US dollarsIn some economies people save, borrow, price and pay in a foreign currency, usually the US dollar. Timor-Leste uses the US dollar as its official currency; in Cambodia the riel circulates alongside a dollar that dominates bank deposits. Dollarisation can be measured, it limits what a central bank can do, it creates risks for banks and borrowers, and some countries have reduced it.
- 05What the framework means for a lender: currency, rates and liquidityThe monetary framework decides which interest rates a lender's funding and loans follow, how much currency risk can build up on its balance sheet and where liquidity would come from under stress. This lesson draws the threads together: how a policy rate change passes through to lending rates, how to measure an open currency position, and how a liquidity buffer is tested currency by currency.
Quiz and certificate 8 questions; those on lesson 1 are free to try. Read every published lesson and score 80% or more for a certificate of completion.
Take the quizPolicy rates and monetary frameworks →Central banks and policy rates: how rates reach borrowers (course) →All courses →