Dynamic Effects of Exchange Rate Changes in the Philippines in 1970-1980

Susan Navarro
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Susan Navarro: School of Economics, University of the Philippines Diliman

No 198603, UP School of Economics Discussion Papers from University of the Philippines School of Economics

Abstract: In this paper, the dynamic effects of exchange rate changes in the Philippines in 1970-1980 are examined and compared with those found by Bautista for 1956-1968, using his supply oriented macroanalytic model. The effectiveness of devaluation as a policy instrument for increasing employment, output and investment was found to have decreased in the 1970s. While having the advantages of having a weaker inflationary pressure, a devaluation therein was found to have introduced a second trade-off, namely lay offs. A comparison of the effects of a single devaluation in 1970 and those of the series of devaluation in 1970-1980 showed the beneficial effects of the latter over the former on employment, output, investment, exports and imports and its negative effects on the real wage rate.

Date: 1986-03
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Published as UPSE Discussion Paper No. 1986-03, March 1986

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