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In the interim the Philippines carried out a stringent IMF adjustment program which eliminated the current account deficit and restored the rate of inflation to near zero. But the output cost was substantial; between 1983 and 1986 real per capita income fell by 18 percent. In some sections of the country, particularly the sugar growing area of
The rate for the peso in Hong Kong and other free markets in the early 1950's also indicated that a new rate of 3 to 4 pesos to the dollar would have been more realistic. However, the Philippine authorities elected to retain the prewar rate of 2 pesos to the dollar, a rate that had prevailed since 1903.2.
The Philippine Financial System and the Debt Crisis. This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research. Volume Title: Developing Country Debt and Economic Performance, Volume 3: Country Studies - Indonesia, Korea, Philippines, Turkey.
The Philippines had pursued a passive exchange rate policy during the 1980s. The real exchange rate of the peso remained almost constant with respect to the U.S. dollar, as gradual depreciation offset a higher domestic inflation rate. But the real effective exchange rate moved with the U.S.
Philippine interest rates declined during the period July 1, 2006 to June 30, 2007, with the benchmark 91-day Treasury Bill auction rate dropping from 6.074% to 3.477%. The downtrend in interest rates was a result of excess liquidity in the global and domestic financial systems and mild inflation due mainly to lower oil prices.
In late 1995, the Bangko Sentral ng Pilipinas switched to a de facto fixed exchange rate regime, seeking to maintain the peso at a value of £26 per $1. The Bangko Sentral ng Pilipinas continued to set base money targets, notwithstanding the currency peg that eliminated scope for an independent monetary policy.
The subsequent tightening of monetary policy, the soaring interest rates during 1984/85, and the continued devaluations of the peso all contributed to the spread of distress among financial and nonfinancial corporations.
