(DP 2009-03)

Over the past twenty- five years, policy changes in the Philippines and global trends leading to market and financial integration have unleashed forces that are changing the country’s economic structure. One of the most important effects is the increasing importance of overseas remittances to the Philippines. This paper looks at the macroeconomic and sectoral impact of remittances and how it has affected the country’s ability to manage its finances. What are the dilemmas posed by robust remittance inflows to our policymakers? In what ways can the government harness this valuable resource? More importantly how can the government lessen its impact on rising inequality which may threaten the country’s social fabric?

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