The Relationship Between Exchange Rates and International Trade of the Philippines (2001-2011)
CONTENTS
INTRODUCTION 1
METHODOLOGY 2
1. Nominal exchange rate (NER) 2
2. Real exchange rate (RER) 2
3. Nominal effective exchange rate (NEER) 2
4. Real effective exchange rate (REER) 3
DATA COLLECTION AND CALCULATION 4
ANALYSIS 6
1. The divergence between the NER and RER index (2001-2011) 6
2. The relationship between NEER, REER and trade competitiveness of the Philippines (2001 – 2011) 10
CONCLUSION 14
REFERENCE 15
INTRODUCTION
The Phillippines is the 46th largest economy in the world, which has been considered one of the Tiger Cub Economies in South-east Asia along with Indonesia, Malaysia and Thailand. As a newly industrialized country, the Phillipines has been switching its direction from agriculture to services and manufacturing.
From 1992 to 2010, the Philippines economy has come up against numerous difficulties and unexpected changes, such as the Asian economic crisis (1998) and the world financial crisis (2008). Those external and internal issues have induced more vulnerability in the country’s economic situation during the period.
In the scope of this paper, our assigned task is to review the exchange rate policy and its impact on the trading competitiveness in the Philippines between 1997 and 2011. To fulfill the project, two main sets of variables, namely Exchange rates and Trade volumes, must be taken into consideration. However, due to the inevitable deficiency and non-concentration of the data available, we would narrow our project’s scope to the period 2001 – 2011 only, with 15 trading partners including the US, Japan, China, Russia, Switzerland, Norway, Turkey, India, South Korea, Brazil, Canada. Singapore, Saudi, Arabia, South Africa and Taiwan.
On fulfilling this project, we aim at providing you with an overview of the Philippines’ foreign exchange market during the given period, as well as the effects of exchange rates movement on its overall trade balance. Furthermore, we would also hope
INTRODUCTION 1
METHODOLOGY 2
1. Nominal exchange rate (NER) 2
2. Real exchange rate (RER) 2
3. Nominal effective exchange rate (NEER) 2
4. Real effective exchange rate (REER) 3
DATA COLLECTION AND CALCULATION 4
ANALYSIS 6
1. The divergence between the NER and RER index (2001-2011) 6
2. The relationship between NEER, REER and trade competitiveness of the Philippines (2001 – 2011) 10
CONCLUSION 14
REFERENCE 15
INTRODUCTION
The Phillippines is the 46th largest economy in the world, which has been considered one of the Tiger Cub Economies in South-east Asia along with Indonesia, Malaysia and Thailand. As a newly industrialized country, the Phillipines has been switching its direction from agriculture to services and manufacturing.
From 1992 to 2010, the Philippines economy has come up against numerous difficulties and unexpected changes, such as the Asian economic crisis (1998) and the world financial crisis (2008). Those external and internal issues have induced more vulnerability in the country’s economic situation during the period.
In the scope of this paper, our assigned task is to review the exchange rate policy and its impact on the trading competitiveness in the Philippines between 1997 and 2011. To fulfill the project, two main sets of variables, namely Exchange rates and Trade volumes, must be taken into consideration. However, due to the inevitable deficiency and non-concentration of the data available, we would narrow our project’s scope to the period 2001 – 2011 only, with 15 trading partners including the US, Japan, China, Russia, Switzerland, Norway, Turkey, India, South Korea, Brazil, Canada. Singapore, Saudi, Arabia, South Africa and Taiwan.
On fulfilling this project, we aim at providing you with an overview of the Philippines’ foreign exchange market during the given period, as well as the effects of exchange rates movement on its overall trade balance. Furthermore, we would also hope