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30 sie 2022 · Based on theoretical models such as purchasing power parity and interest rate parity, this paper analyzes the factors affecting the exchange rate of the Philippine peso from the aspects of...
Based on theoretical models such as purchasing power parity and interest rate parity, this paper analyzes the factors affecting the exchange rate of the Philippine peso from the aspects of inflation, balance of payments, and interest rates.
ABSTRACT. This paper aims to investigate the factors affecting the real exchange rate in the Philippines from 1973 to 2014, namely gross domestic product, volume of money flow, net foreign assets, budget deficit, import restrictions, and oil prices.
The scale variable is represented by real GNP, to represent real income, and the opportunity-cost variable by expected inflation, to represent the value of the goods that are forgone when money is held instead. The money-demand equation is specified as:
The experience of the Philippines with exchange controls and an over-valued exchange rate is one that is common to many underdeveloped countries. What makes the Philippine story interesting, however, is that decontrol was accomplished overnight without disastrous consequences. Many economists would probably have favored a quick devaluation of the
The model’s projections are based on dynamic simulations of equations (1) and (2), so the projected value at time t is used to calculate the prediction at t+1, etc., over the next 3 months on a rolling basis. The forecast tracks the actual peso movements relatively well, including for the recent period.
Currency depreciations and inflation in EMDEs in 2018. Source: Haver Analytics, World Bank. Note: EMDEs = emerging market and developing economies. Depreciations are monthly declines in the nominal effective exchange rate of more than 5 percent on an annualized basis.
