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Exchange Rate Policy in Philippine Development: Conclusion

The real exchange rate is arguably the most important relative price variable in an open economic system. Many developing economies, including the Philippines, have floundered as a consequence of the real exchange rate being heavily overvalued. On the other hand, the economic performance of countries like Singapore and Malaysia have benefited from maintaining "realistic and competitive" real exchange rates.

The real exchange rate links the nominal exchange rate (which the government can control) to the real sphere of the national economy-most directly, to relative incentives among production sectors-through which the further effects of exchange rate policy on resource allocation, output ...

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