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A Note on Philippine Financial Openness

Author

Listed:
  • Jose Antonio Tan III
  • Cayetano Paderanga, Jr.

    (University of the Philippines School of Economics)

Abstract

In 1991, the Philippine launched a series of foreign exchange reforms, which partially opened the capital account. These set of reforms, if completed, will result in the financial integration of the economy with the global financial markets, thus, would complete the sequence of liberalization and integration. This study examines the degree of financial integration of the Philippines with the international economy. In particular, two questions are to be answered. First, how financially integrated is the Philippines with the rest of the world? And, second, how has foreign exchange liberalization contributed to Philippine financial openness? Philippine financial openness is examined using the gross capital flow ratio, the Feldstein-Horioka regressions, and variations of tests based on uncovered interest parity. While the result confirms the substantial increase in gross capital flows, evidence using investment-saving correlation and arbitrage tests suggests that the degree of financial openness is still low. The empirical evidence also suggests that capital account liberalization has not contributed much to financial integration.

Suggested Citation

  • Jose Antonio Tan III & Cayetano Paderanga, Jr., 1998. "A Note on Philippine Financial Openness," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 35(1), pages 27-61, June.
    • Handle: RePEc:phs:prejrn:v:35:y:1998:i:1:p:27-61
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    File URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/79/510
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    Cited by:

    1. Mapa, Dennis S. & Briones, Kristine Joy S., 2006. "Measuring the Common Component of Stock Market Fluctuations in the Asia-Pacific Region," MPRA Paper 21247, University Library of Munich, Germany.

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