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The Impact of Foreign Exchange Liberalization Reforms on the Philippine Economy: An Initial Assessment
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BSP WPS 2016-01: The Impact of Foreign Exchange Liberalization Reforms on the Philippine Economy: An Initial Assessment

This paper examines the impact of easing the foreign exchange (FX) regulatory rules in the Philippines. Our preliminary findings imply that, in general, the easing of FX regulations has helped mobilize foreign exchange resources to finance requirements of the domestic economy. The significant contribution of greater foreign exchange transactions led to further opening of the country’s current and capital accounts. In turn, monetary and financial markets expansion ensued. Meanwhile, the impact on monetary policy appears to be marginal as the easing of FX rules has coincided with a declining exchange rate passthrough and a relatively stable inflation path. These developments suggest that the liberalization of FX rules may have underscored the importance of greater openness as essential component of macroeconomic policy. However, given the macroeconomic risks arising from foreign exchange markets and the case for regulation and supervision of other financial markets, the BSP’s vigilance to complement the easing of FX rules with prudential regulations and market surveillance to promote international investor confidence and market discipline continues to be crucially important. Despite the foreign exchange market risks largely due to global economic uncertainties, the economic benefits of easing FX rules by way of expansion of income become clear.

Bangko Sentral ng Pilipinas
Authors Keywords
Bayangos, Veronica, B.; Elloso, Lilia, V. ; Hallig, John Michael Rennie, G.; Yeung, Jodeth Niña, R.; Salamatin, April Michelle, D.; foreign exchange liberalization; ; capital account liberalization; foreign exchange;
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