A Study on Philippine Exchange Rate Policies
Since the late 1960s, there has been strong resistance from several quarters against any form of devaluation. While many empirical studies corroborate their sentiments, this paper attempts to show that if exchange rates were fixed, then it would be misleading to use them in macro-supply equations to represent the shadow exchange rate or as a measure of the scarcity of foreign exchange. The macro model presented here shows that that devaluation being contractionary is not necessarily true because it increases the domestic costs of imports. Hence, it is important that devaluation is not accompanied by contractionary policies.
|Date of creation:||1992|
|Date of revision:|
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- Devarajan, Shantayanan & Lewis, Jeffrey D & Robinson, Sherman, 1993. "External Shocks, Purchasing Power Parity, and the Equilibrium Real Exchange Rate," World Bank Economic Review, World Bank Group, vol. 7(1), pages 45-63, January.
- Krugman, Paul & Taylor, Lance, 1978.
"Contractionary effects of devaluation,"
Journal of International Economics,
Elsevier, vol. 8(3), pages 445-456, August.
- Lim, Joseph, 1987. "The new structuralist critique of the monetarist theory of inflation : The case of the Philippines," Journal of Development Economics, Elsevier, vol. 25(1), pages 45-61, February.
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