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    Modelling the oil price–exchange rate nexus: the Philippine case
    (2023-01-16) Dela Cruz, Frabert Ace E.; Reyes, Eirene Gillian M.; Alburo, Florian A.
    This paper examines the impact of oil prices on the PHP/USD nominal exchange rate. The literature specifies two channels through which the effects of oil price shocks are transmitted to changes in exchange rates. In the case of the Philippines, one can see that the “terms of trade” channel is the dominant effect. Using daily oil prices and PHP/USD exchange rate data from January 2, 2003 to October 24, 2022, this study employed the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model to determine the effects of oil prices on the exchange rate. The results show that a 10% increase in oil prices is associated with a 0.13% Philippine peso appreciation relative to the US dollar and is statistically significant. This finding is consistent with the “terms of trade” channel, where oil price increases are expected to be associated with exchange rate appreciation for countries with energy-intensive non-tradable sectors.
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    OFW remittances and real effective exchange rates: evidence from the Philippines 2000-2020
    (2022-12) Pascual, Mark Joseph M.; Seno, Samantha; Alburo, Florian A.
    Migrant remittances augment most of developing countries’ external funding contributing to their economic growth, including the Philippines. The consistently massive inflows each year have revealed their increasing importance to households and the macro economy; however, some studies have warned of their undesirable effects in the foreign exchange market. Specifically, an increase in remittances ends to increase the real exchange rate and encourage a real currency appreciation that negatively affects trade balance. This paper examines the impact of remittances on the real effective exchange rate (REER) index of the Philippines from 2000 to 2020, along with trade variables like exports, imports, and foreign direct investment (FDI) that traditionally influence the foreign exchange market. After a logarithmic transformation and using multiple linear regression, this paper empirically validates that remittances can independently cause an appreciation and overvaluation of the peso. However, this is canceled out by the effect of imports as it depreciates the peso by almost the same magnitude. The opposing effects of remittances and trade on the economy depend on their respective degrees of over/undervaluation of the currency.
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    Where do remittances go? a comparative analysis on the inflows of remittance and the expenditure behavior of PH households during 2003 and 2021
    (2023-07-11) Aguila, Liane Diane L.; Cabatay, Hannah Jo Marie C.; Alburo, Florian A.
    The number of Overseas Filipino Workers (OFWs) has steadily increased since the 1950s. Remittances sent back to families at home have not only shielded the country from economic downturns but have also benefited households in financing their necessities. This study analyzes the relationship between remittances and household expenditure behavior during an almost two-decade period by looking at the effect of remittance in the expenditure share of the following items: food, food eaten at home, food eaten outside, health, education, occasion, recreation, and transportation and communication, using the FIES 2003 and 2021 dataset from the Philippine Statistics Authority. The Working-Leser Model was used wherein three (3) econometric techniques were performed to address endogeneity, heteroskedasticity, and the presence of zero values—Instrumental Variables Estimation using Two-Stage Least-Squares Regression, Quantile Regression, and Censored Tobit Analysis, respectively. All three techniques revealed consistent findings that remittances have positive significant effects on food eaten outside, health, and education expenditures, while there are negative significant effects on food and food eaten at home during both 2003 and 2021. The other expenditures show varying results in terms of sign and significance. Further, results show that there is stability in the expenditure behavior of households receiving remittances in terms of education, occasion, and recreation; that is, the effect of remittance is not significantly different in 2003 and 2021. This can be explained by the similar shocks during those years.
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    Asymmetric dependence in the Philippine exchange rate markets: A copula approach
    (2013-04) Pragacha, Romeo Jay Curayag
    The use of copulas is getting attention in economics due to its application in detecting and analyzing exchange rate dependence asymmetry. This paper applies Patton's (2006) conditional copula method in detecting and analyzing exchange rate dependence for the Philippine peso vis-a-vis the US Dollar, the Japanese Yen, the Saudi Rial, the Euro, the Singaporean Dollar, and the Thai Baht. We find that the dependence behavior of each pairs of exchange rates changes in periods of political and economic uncertainty such as during the Philippine political turmoil of 2001 and during the World Financial Crisis of 2009. Majority of the currency pairs in question also exhibited more leaning towards joint depreciation than appreciation possibly due to the greater importance that monetary authorities put to competitiveness than to price stability in their intervention reaction functions over the sample period. The Philippine monetary authorities must take into account the large swings in exchange rates in one direction in targeting inflation and in implementing a growth strategy based on exchange rate targets.
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    The effects of interest rate hikes on the exchange rate and the gross domestic product
    (2000-10) Arellano, Maria Lourdes Dela Cruz; Bado, Alvin Ferrer