| This paper addresses three questions about Philippine remittances. First, it aims to ascertain whether remittances to the country are responsible for Dutch Disease-type effects. Second, the paper applies business cycle filters in order to better understand the cyclicality of Philippine remittance flows. Third, it compares the respective effects that remittances and foreign direct investment (FDI) have on the Philippine economy.;With regard to these areas of inquiry, its findings are as follows. Philippine remittances are correlated with real exchange rate appreciations and a loss of competitiveness in the economy's tradable sector. However, these effects are counterbalanced to some extent by the overall countercyclicality of remittance flows, especially during times of economic crises. Finally, vector autoregression and impulse-response analysis, lend further support to the conclusion that Philippine remittances are countercyclical vis-a-vis domestic economic conditions, as contrasted against the comparable behavior of FDI. |
