Extending the IS-MP-IA model (Romer, 2000), we find that equilibrium output in Singapore
is negatively affected by the expected inflation rate and the world interest rate
and positively influenced by real appreciation, stock market performance, and world
output. Equilibrium GDP would rise by 0.872% if the real effective exchange rate
rises by 1%. The coefficient of real government deficit spending is found to be insignificant,
suggesting that pursuing fiscal discipline and budget surpluses in the long run by
the Singapore government is appropriate.