Currency interchangeability arrangement between Brunei and Singapore: a cost-benefit analysis

Singapore, Malaysia and Brunei had a currency interchangeability arrangement whereby the currency of one country is circulated in the other countries as "customary tender' and accepted at par with the country's own currency. When Malaysia decided to opt out of this arrangement in 1973, Brunei chose to maintain the arrangement with Singapore. This paper concludes that both Singapore and Brunei have benefited from the arrangement in terms of more stability in their currencies and an increase in their bilateral trade and investment. The costs to them are minimal. As a result, it is envisaged that the arrangement will continue for an indefinite period. Their experiences with the arrangement ought to be studied closely by countries intending to form monetary unions. -Authors