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Managing Capital Flows : The Case of the Philippines

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  • Josef T. Yap

    (PIDS)

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    Abstract

    During the past five years or so, most East Asian economies including the Philippines experienced a rising level of foreign exchange reserves and rapidly appreciating currencies both in nominal and real terms. One cause has been the resurgence of capital flows, which makes the issue of how to manage them relevant. However, the experience with regard to capital flows among East Asian economies is mixed and the level of capital flows to the region is proportionally less than that prior to the 1997 crisis. Another reason is the rise in current account surpluses. The Philippines has experienced both a return of capital inflows and a more favorable current account balance, with the latter largely due to remittances from overseas workers. However, like many other regional currencies, the appreciation of the peso is not commensurate to movements of the BOP accounts. Currencies in the region are reacting primarily to the general weakness of the US dollar, and global uncertainties have contributed to weak investment which in turn is another major reason behind the current account surplus of several economies including the Philippines. Policy measures at the domestic level can focus on reviving private investment, particularly channeling overseas remittances to more productive investment. Meanwhile, East Asian financial and monetary cooperation can also result in a unified front aimed at overhauling the unipolar global financial system.

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    Bibliographic Info

    Paper provided by East Asian Bureau of Economic Research in its series Development Economics Working Papers with number 22703.

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    Date of creation: Jan 2008
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    Handle: RePEc:eab:develo:22703

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    Related research

    Keywords: Foreign Exchange; Short-Term Capital Movements; International Finance;

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    References

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    1. Hakan Berument & N. Nergiz Dincer, 2004. "Do Capital Flows Improve Macroeconomic Performance in Emerging Markets? : The Turkish Experience," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 40(4), pages 20-32, July.
    2. Kawai, Masahiro, 2005. "East Asian economic regionalism: progress and challenges," Journal of Asian Economics, Elsevier, vol. 16(1), pages 29-55, February.
    3. Yang, Dean, 2005. "International migration, human capital, and entrepreneurship : evidence from Philippine migrants'exchange rate shocks," Policy Research Working Paper Series 3578, The World Bank.
    4. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1994. "The capital inflows problem: Concepts and issues," MPRA Paper 13902, University Library of Munich, Germany.
    5. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1996. "Inflows of capital to developing countries in the 1990s," MPRA Paper 13707, University Library of Munich, Germany.
    6. Lamberte, Mario B., 1994. "Managing Surges in Capital Inflows: The Philippines Case," Discussion Papers DP 1994-20, Philippine Institute for Development Studies.
    7. Mundell, Robert, 2005. "The case for a world currency," Journal of Policy Modeling, Elsevier, vol. 27(4), pages 465-475, June.
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    Cited by:
    1. Yap, Josef T. & Cuenca, Janet S. & Reyes, Celia M., 2009. "Impact of the Global Financial and Economic Crisis on the Philippines," Discussion Papers DP 2009-30, Philippine Institute for Development Studies.

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