| Summary/Abstract |
As economic activities came to a standstill during the COVID-19 pandemic, the Philippines, like many economies across the globe, experienced rising inflation, currency depreciation and fluctuating capital markets. To manage these variables and stabilize the macroeconomy, the central bank resorted to monetary tightening. In the Philippines, a key mechanism that contributes to this stabilizing effect rests on remittances that have been cushioning the economy from the effects of volatilities and uncertainties in the global economy. During economic downturns and reduced capital flows, remittances provide support not only to recipient households but also to the country’s financial sector. Using time series analysis, we estimate the response of remittance inflows on impulses from selected macroeconomic variables, namely interest rate, inflation rate and exchange rate. A common characteristic shared by the selected indicators is their influence on recipient households’ consumption-related decision-making process. These findings warrant the need to redesign major institutional policies to manage remittances in light of their anticipated feedback effect on the economy.
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