Zeno Ronald R. Abenoja, Jasmin Dacio, Sarah Jane Castañares, J. Ocampo, Mark Rex Romaraog
The Bangko Sentral ng Pilipinas (BSP) subscribes to the Forecasting and Policy Analysis System (FPAS) as the framework for macroeconomic forecasting and analysis in support of monetary policy formulation. FPAS is a standard framework, adopted by many in"ation-targeting central banks, that organizes the generation, consolidation, and analysis of economic information relavant to monetary policy formulation. This paper aims to describe how macroeconomic forecasts and policy simulations are generated to support monetary policy analysis and formulation at the BSP. To this end, this article summarizes the main features of the process involved in generating the baseline forecasts, alternative scenarios, and policy simulations. We highlight the complementary roles played by the BSP’s suite of models and the expert judgement from the sector specialists as well as the importance of forecast communication in the transmission of monetary policy. Finally, we present a systematic evaluation of the forecasting performance of the BSP from 2010 to 2020 together with some of the lessons in forecasting during the COVID-19 pandemic and the recent efforts to improve the BSP’s FPAS.
{"title":"The BSP's Forecasting and Policy Analysis System","authors":"Zeno Ronald R. Abenoja, Jasmin Dacio, Sarah Jane Castañares, J. Ocampo, Mark Rex Romaraog","doi":"10.37907/4erp2202j","DOIUrl":"https://doi.org/10.37907/4erp2202j","url":null,"abstract":"The Bangko Sentral ng Pilipinas (BSP) subscribes to the Forecasting and Policy Analysis System (FPAS) as the framework for macroeconomic forecasting and analysis in support of monetary policy formulation. FPAS is a standard framework, adopted by many in\"ation-targeting central banks, that organizes the generation, consolidation, and analysis of economic information relavant to monetary policy formulation. This paper aims to describe how macroeconomic forecasts and policy simulations are generated to support monetary policy analysis and formulation at the BSP. To this end, this article summarizes the main features of the process involved in generating the baseline forecasts, alternative scenarios, and policy simulations. We highlight the complementary roles played by the BSP’s suite of models and the expert judgement from the sector specialists as well as the importance of forecast communication in the transmission of monetary policy. Finally, we present a systematic evaluation of the forecasting performance of the BSP from 2010 to 2020 together with some of the lessons in forecasting during the COVID-19 pandemic and the recent efforts to improve the BSP’s FPAS.","PeriodicalId":91420,"journal":{"name":"The Philippine review of economics","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42468623","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the price and output effects of Philippine monetary policy through its transmission channels from 1996 to 2019 using Structural Vector Autoregression (SVAR) models. Recursive and non-recursive identi!cation strategies are implemented to build a model that represents the small open economy of the Philippines, which is affected by exogenous shocks in oil prices and US interest rates. Impulse response functions are then compared between recursive and non-recursive models to select results that demonstrate consistency with macroeconomic theory and overall statistical signi!cance. The Local Projections method is then applied as a means of verifying the accuracy of the preferred model’s results. Findings show that a contractionary shock to Philippine monetary policy has weak short-term effects on domestic output and prices. These results contribute to the literature by characterizing the strength of transmission channels 17 years after in"ation targeting was adopted as a primary component of Philippine monetary policy.
{"title":"The impact of Philippine monetary policy on domestic prices and output: evaluating the country’s transmission channels","authors":"Sanjeev Parmanand","doi":"10.37907/3erp2202j","DOIUrl":"https://doi.org/10.37907/3erp2202j","url":null,"abstract":"This paper examines the price and output effects of Philippine monetary policy through its transmission channels from 1996 to 2019 using Structural Vector Autoregression (SVAR) models. Recursive and non-recursive identi!cation strategies are implemented to build a model that represents the small open economy of the Philippines, which is affected by exogenous shocks in oil prices and US interest rates. Impulse response functions are then compared between recursive and non-recursive models to select results that demonstrate consistency with macroeconomic theory and overall statistical signi!cance. The Local Projections method is then applied as a means of verifying the accuracy of the preferred model’s results. Findings show that a contractionary shock to Philippine monetary policy has weak short-term effects on domestic output and prices. These results contribute to the literature by characterizing the strength of transmission channels 17 years after in\"ation targeting was adopted as a primary component of Philippine monetary policy.","PeriodicalId":91420,"journal":{"name":"The Philippine review of economics","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46845942","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In 1988 and 1989, the Philippine government implemented free public and subsidized private secondary schooling through two major policies, namely Republic Act (RA) 6655 and RA 6728. This study investigates the long-run impacts of the two policies on schooling attainment and income using a regression discontinuity design (RDD). It draws data from the Annual Poverty Indicators Survey 2008 and 2011. We present two main findings. First, younger cohorts of women and men, who are policy beneficiaries, have significantly higher educational attainment relative to non-beneficiaries. Second, an additional year of schooling significantly increases individual income of women in the informal sector and men in the formal sector. In brief, our findings suggest that the policies are effective in enhancing schooling attainment, but the downstream impacts appear to have accrued substantially to women employed in the informal sector and men employed in the formal sector.
{"title":"The impacts of secondary education reforms on schooling and income of women and men in the Philippines","authors":"M. Revilla, J. Estudillo","doi":"10.37907/1erp2202j","DOIUrl":"https://doi.org/10.37907/1erp2202j","url":null,"abstract":"In 1988 and 1989, the Philippine government implemented free public and subsidized private secondary schooling through two major policies, namely Republic Act (RA) 6655 and RA 6728. This study investigates the long-run impacts of the two policies on schooling attainment and income using a regression discontinuity design (RDD). It draws data from the Annual Poverty Indicators Survey 2008 and 2011. We present two main findings. First, younger cohorts of women and men, who are policy beneficiaries, have significantly higher educational attainment relative to non-beneficiaries. Second, an additional year of schooling significantly increases individual income of women in the informal sector and men in the formal sector. In brief, our findings suggest that the policies are effective in enhancing schooling attainment, but the downstream impacts appear to have accrued substantially to women employed in the informal sector and men employed in the formal sector.","PeriodicalId":91420,"journal":{"name":"The Philippine review of economics","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47410027","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Manuel Azcárraga y Palmero's La libertad de comercio en las islas Filipinas (1872) was an unequivocal and consistent tract advocating free trade as a commercial policy for the Philippines. It is remarkable for its explicit and frequent reference to free-trade theory and the example of other nations (notably Britain and its colonies) as a guide to policy. It uses a historical approach in its critique of Spanish mercantilist ideas and biases, which are held responsible for centuries of foregone development opportunities for the Philippines. This article traces Azcárraga’s arguments and links them to Smith’s [1776] theory of international trade and its later elaborations (Myint [1958, 1977] and Schumacher [2015, 2016]). The protectionist mindset and policies Azcárraga believed to have held back Philippine progress one hundred !fty years ago are a striking portent of issues hounding the country’s development in the 20th century and even later.
Manuel Azcárraga y Palmero的La libertad de commercicio en las islas Philippines(1872)是一本毫不含糊且始终如一的小册子，主张将自由贸易作为菲律宾的商业政策。值得注意的是，它明确而频繁地引用自由贸易理论，并以其他国家(尤其是英国及其殖民地)为例作为政策指南。它在批判西班牙重商主义思想和偏见时采用了一种历史的方法，这种思想和偏见导致菲律宾几个世纪以来失去了发展机会。本文追溯Azcárraga的论点，并将其与史密斯[1776]的国际贸易理论及其后来的阐述(Myint[1958, 1977]和Schumacher[2015, 2016])联系起来。据信，保护主义思想和政策Azcárraga在100年前阻碍了菲律宾的进步，这是20世纪乃至以后困扰菲律宾发展的问题的一个突出征兆。
{"title":"Azcárraga’s critique of mercantilism: trade as an engine of growth","authors":"E. de Dios","doi":"10.37907/5erp2202j","DOIUrl":"https://doi.org/10.37907/5erp2202j","url":null,"abstract":"Manuel Azcárraga y Palmero's La libertad de comercio en las islas Filipinas (1872) was an unequivocal and consistent tract advocating free trade as a commercial policy for the Philippines. It is remarkable for its explicit and frequent reference to free-trade theory and the example of other nations (notably Britain and its colonies) as a guide to policy. It uses a historical approach in its critique of Spanish mercantilist ideas and biases, which are held responsible for centuries of foregone development opportunities for the Philippines. This article traces Azcárraga’s arguments and links them to Smith’s [1776] theory of international trade and its later elaborations (Myint [1958, 1977] and Schumacher [2015, 2016]). The protectionist mindset and policies Azcárraga believed to have held back Philippine progress one hundred !fty years ago are a striking portent of issues hounding the country’s development in the 20th century and even later.","PeriodicalId":91420,"journal":{"name":"The Philippine review of economics","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48112150","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Trauma to triumph: rising from the ashes of the Asian Financial Crisis (edited by Hoe Ee Khor, Diwa C. Guinigundo and Masahiro Kawai) is an epic endeavor to link the devastation and “trauma” from the 1997-98 Asian Financial Crisis (AFC) in the ASEAN+3 region to the adoption of key domestic structural reforms and the establishment of regional !nancial cooperative mechanisms, which would be instrumental to the region’s “triumphs” of recovering and growing in the AFC’s aftermath, weathering the adverse effects of the 2007-08 Global Financial Crisis (GFC) and even thriving in the post-GFC period. In the midst of the still looming threat of the COVID-19 global pandemic, and the new threats posed by the Ukraine-Russia war and cost-push global in"ation, the titular “triumph” may also extend to the current opportunities for greater regional cooperation to overcome these challenges.
从创伤走向胜利：从亚洲金融危机的灰烬中崛起（由Hoe Ee Khor、Diwa C.Guinigundo和Masahiro Kawai编辑）是一项史诗般的努力，旨在将1997-98年亚洲金融危机（AFC）在东盟+3地区造成的破坏和“创伤”与关键的国内结构改革和建立地区联系起来！金融合作机制将有助于该地区在亚足联之后恢复和发展的“胜利”，抵御2007-08年全球金融危机的不利影响，甚至在后金融危机时期蓬勃发展。在新冠肺炎全球大流行的威胁仍然迫在眉睫的情况下，以及乌克兰-俄罗斯战争和代价高昂的全球一体化带来的新威胁，名义上的“胜利”也可能扩展到当前加强区域合作以克服这些挑战的机会。
{"title":"Book Review of Trauma to triumph: rising from the ashes of the Asian Financial Crisis","authors":"S. L. Daway‐Ducanes","doi":"10.37907/6erp2202j","DOIUrl":"https://doi.org/10.37907/6erp2202j","url":null,"abstract":"Trauma to triumph: rising from the ashes of the Asian Financial Crisis (edited by Hoe Ee Khor, Diwa C. Guinigundo and Masahiro Kawai) is an epic endeavor to link the devastation and “trauma” from the 1997-98 Asian Financial Crisis (AFC) in the ASEAN+3 region to the adoption of key domestic structural reforms and the establishment of regional !nancial cooperative mechanisms, which would be instrumental to the region’s “triumphs” of recovering and growing in the AFC’s aftermath, weathering the adverse effects of the 2007-08 Global Financial Crisis (GFC) and even thriving in the post-GFC period. In the midst of the still looming threat of the COVID-19 global pandemic, and the new threats posed by the Ukraine-Russia war and cost-push global in\"ation, the titular “triumph” may also extend to the current opportunities for greater regional cooperation to overcome these challenges.","PeriodicalId":91420,"journal":{"name":"The Philippine review of economics","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47215568","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Luisito C. Abueg, Christian Marvin B. Zamora, Leonard Nevin Correa
The Philippines has been one of the countries greatly affected by the COVID-19 pandemic. The country is regarded to be under the world's longest lockdown with an upsurge of cases, and it has also entered into an official recession with record-breaking economic contraction and high unemployment rates, fueling economic uncertainties. These macroeconomic indicators show serious signs of the adversities of the pandemic affecting the real estate development sector. As the real estate sector recalibrates its plans on response, recovery, and resiliency, this paper attempts to provide empirical evidence on the celebrated model in real estate economics proposed by Homer Hoyt and later developed by Glenn R. Mueller: the property cycle. We also provide contextualization on the property cycle empirics under the pandemic, given the sector’s reintroduction of the Real Estate Investment Trust (REIT). We argue that the REIT mainly supports the real estate development industry given the adversities of the pandemic and its accompanying recession, as well as an update to the long-term plans of the industry and its players in compliance with the “new normal”.
{"title":"COVID-19 pandemic and the Philippine real estate property cycle: indications of bubble and burst in the “new normal”?","authors":"Luisito C. Abueg, Christian Marvin B. Zamora, Leonard Nevin Correa","doi":"10.37907/11erp1202jd","DOIUrl":"https://doi.org/10.37907/11erp1202jd","url":null,"abstract":"The Philippines has been one of the countries greatly affected by the COVID-19 pandemic. The country is regarded to be under the world's longest lockdown with an upsurge of cases, and it has also entered into an official recession with record-breaking economic contraction and high unemployment rates, fueling economic uncertainties. These macroeconomic indicators show serious signs of the adversities of the pandemic affecting the real estate development sector. As the real estate sector recalibrates its plans on response, recovery, and resiliency, this paper attempts to provide empirical evidence on the celebrated model in real estate economics proposed by Homer Hoyt and later developed by Glenn R. Mueller: the property cycle. We also provide contextualization on the property cycle empirics under the pandemic, given the sector’s reintroduction of the Real Estate Investment Trust (REIT). We argue that the REIT mainly supports the real estate development industry given the adversities of the pandemic and its accompanying recession, as well as an update to the long-term plans of the industry and its players in compliance with the “new normal”.","PeriodicalId":91420,"journal":{"name":"The Philippine review of economics","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45548721","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Emmanuel Genesis T. Andal, Amelia L. Bello, M. Catelo
This paper investigates the coping strategies employed by sample micro, small, or medium enterprises (MSMEs) in Laguna using the SME Competitiveness Grid framework developed by the International Trade Centre (ITC). The paper finds that sample MSMEs in Laguna did not find it easy to access MSME assistance programs, and that many are not even aware that such assistance programs exist. However, most MSMEs were found to be flexible and innovative when it comes to their coping strategies; the most common are through using online platforms and customizing or making new products. The paper also finds that assistance on reduction of fixed and operating costs, improvements in credit access, and greater ease in doing business are the most desired forms of government intervention, consistent with the findings of earlier surveys.
{"title":"Coping strategies of selected MSMEs in Laguna one year after COVID-19","authors":"Emmanuel Genesis T. Andal, Amelia L. Bello, M. Catelo","doi":"10.37907/10erp1202jd","DOIUrl":"https://doi.org/10.37907/10erp1202jd","url":null,"abstract":"This paper investigates the coping strategies employed by sample micro, small, or medium enterprises (MSMEs) in Laguna using the SME Competitiveness Grid framework developed by the International Trade Centre (ITC). The paper finds that sample MSMEs in Laguna did not find it easy to access MSME assistance programs, and that many are not even aware that such assistance programs exist. However, most MSMEs were found to be flexible and innovative when it comes to their coping strategies; the most common are through using online platforms and customizing or making new products. The paper also finds that assistance on reduction of fixed and operating costs, improvements in credit access, and greater ease in doing business are the most desired forms of government intervention, consistent with the findings of earlier surveys.","PeriodicalId":91420,"journal":{"name":"The Philippine review of economics","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47350972","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this brief article, we attempt to quantify the number of households in the country which are ‘highly vulnerable’ to hunger and poverty due to sudden and highly restrictive lockdowns, such as the enhanced community quarantine, and other social distancing measures, as well as estimate the budget that will be needed to address their vulnerability. ‘Highly vulnerable’ households are defined in this study as those unlikely to have incomes during strict lockdown periods because of the employment characteristics of their employed members and which likely have little or no savings to tide them over. Using nationally-representative household data, we define a job loss index to identify the employment characteristics that are most sensitive to the lockdown measures, and given these employment characteristics, identify the ‘highly vulnerable’ households. Depending on the pre-lockdown income threshold eligibility used, we estimate the number of ‘highly vulnerable’ households in the country at anywhere from 7.4 million to 11.3 million. At ₱5,000 per ‘highly vulnerable’ household, the estimated costs amount to ₱36.9 billion to ₱56.5 billion, again depending on the income threshold used. We also propose a way for the government to operationalize the process of identifying and helping ‘highly vulnerable’ households.
{"title":"Targeting ‘highly vulnerable’ households during strict lockdowns","authors":"G. Ducanes, S. L. Daway‐Ducanes, Edita E. Tan","doi":"10.37907/3erp1202jd","DOIUrl":"https://doi.org/10.37907/3erp1202jd","url":null,"abstract":"In this brief article, we attempt to quantify the number of households in the country which are ‘highly vulnerable’ to hunger and poverty due to sudden and highly restrictive lockdowns, such as the enhanced community quarantine, and other social distancing measures, as well as estimate the budget that will be needed to address their vulnerability. ‘Highly vulnerable’ households are defined in this study as those unlikely to have incomes during strict lockdown periods because of the employment characteristics of their employed members and which likely have little or no savings to tide them over. Using nationally-representative household data, we define a job loss index to identify the employment characteristics that are most sensitive to the lockdown measures, and given these employment characteristics, identify the ‘highly vulnerable’ households. Depending on the pre-lockdown income threshold eligibility used, we estimate the number of ‘highly vulnerable’ households in the country at anywhere from 7.4 million to 11.3 million. At ₱5,000 per ‘highly vulnerable’ household, the estimated costs amount to ₱36.9 billion to ₱56.5 billion, again depending on the income threshold used. We also propose a way for the government to operationalize the process of identifying and helping ‘highly vulnerable’ households.","PeriodicalId":91420,"journal":{"name":"The Philippine review of economics","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47723432","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Before the COVID-19 pandemic, the Philippine government was already implementing policies and building infrastructure aimed at improving the country’s road-based public transportation system and alleviating impacts of traffic congestion, especially in Metro Manila. However, with the pandemic, new priorities emerged. Public transportation now plays a vital role in controlling the spread of the disease while, at the same time, ensures that essential services are accessible, and public transport providers are sufficiently supported. This paper analyzes the road-based public transportation policies of the government during the pandemic using a multi-dimensional framework. In general, and in principle, we see that the government policies issued are consistent with the recommended transport policies that must be implemented during such crisis. However, there are some strategies that are untimely implemented, such as the mandatory utilization of the integrated terminals, the forced consolidation of transport providers, and the continuing modernization of jeepneys.
{"title":"Transportation policy potholes: analyzing Metro Manila’s COVID-19 response","authors":"C. Magno, Kevin Daniel Quizon, Dante B. Gatmaytan","doi":"10.37907/12erp1202jd","DOIUrl":"https://doi.org/10.37907/12erp1202jd","url":null,"abstract":"Before the COVID-19 pandemic, the Philippine government was already implementing policies and building infrastructure aimed at improving the country’s road-based public transportation system and alleviating impacts of traffic congestion, especially in Metro Manila. However, with the pandemic, new priorities emerged. Public transportation now plays a vital role in controlling the spread of the disease while, at the same time, ensures that essential services are accessible, and public transport providers are sufficiently supported. This paper analyzes the road-based public transportation policies of the government during the pandemic using a multi-dimensional framework. In general, and in principle, we see that the government policies issued are consistent with the recommended transport policies that must be implemented during such crisis. However, there are some strategies that are untimely implemented, such as the mandatory utilization of the integrated terminals, the forced consolidation of transport providers, and the continuing modernization of jeepneys.","PeriodicalId":91420,"journal":{"name":"The Philippine review of economics","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44285586","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The COVID-19 pandemic is an eminent threat posed by nature to the survival of the whole community. The cost X it imposes upon the community can be mitigated by the community’s pre-emptive public goods: an early warning system, capacity for monitoring, contact tracing and isolating infected persons, the strength of its public health system and the cultivated readiness to cooperate with anti-COVID protocols. The community provides these public goods in a nonstrategic game N (Nature) where the probability of a “bad outcome” (being symptomatically infected) falls with the total spending on pre-emptive public goods. Aside from N, members of the community play an Economic Dilemma Game (EDG), a symmetric Prisoner’s Dilemma Game (PDG) with strategy set (C, D), where the community earns its economic income which in turn provides the financing of the pre-emptive public goods. Games EDG and N are fused into a composite game N+EDG by defining the probability of a good outcome as increasing with the level of public goods financing. N+EDG has the same strategy set (C, D) as EDG but the payoffs of players are composite: the payoff from EDG less the expected share of the pandemic cost to the members. We show that there is a threshold pandemic cost X0 (Ostrom threshold) so that if X ≥ X0, the N+EDG has dominant strategy in C. At the cooperative equilibrium, the community is at its peak strength: economic output from EDG is largest and the contribution to pre-emptive public good is highest. A severe-enough cost of the pandemic threat as perceived by the group (i) causes players to exhibit an altruistic phenotype (choosing C every time) and (ii) leads to the lowest probability of a bad outcome. We argue that previous experience with pandemics in the last two decades on top of a higher tendency to follow authority in East Asia supported both the provision of better pre-emptive public goods and the higher abidance with anti-COVID protocols. These explain better performance.
{"title":"Pandemic Threat, Ostrom Threshold and Pre-Emptive Public Goods: why East Asia performed better in the COVID-19 crisis","authors":"R. Fabella","doi":"10.37907/1erp1202jd","DOIUrl":"https://doi.org/10.37907/1erp1202jd","url":null,"abstract":"The COVID-19 pandemic is an eminent threat posed by nature to the survival of the whole community. The cost X it imposes upon the community can be mitigated by the community’s pre-emptive public goods: an early warning system, capacity for monitoring, contact tracing and isolating infected persons, the strength of its public health system and the cultivated readiness to cooperate with anti-COVID protocols. The community provides these public goods in a nonstrategic game N (Nature) where the probability of a “bad outcome” (being symptomatically infected) falls with the total spending on pre-emptive public goods. Aside from N, members of the community play an Economic Dilemma Game (EDG), a symmetric Prisoner’s Dilemma Game (PDG) with strategy set (C, D), where the community earns its economic income which in turn provides the financing of the pre-emptive public goods. Games EDG and N are fused into a composite game N+EDG by defining the probability of a good outcome as increasing with the level of public goods financing. N+EDG has the same strategy set (C, D) as EDG but the payoffs of players are composite: the payoff from EDG less the expected share of the pandemic cost to the members. We show that there is a threshold pandemic cost X0 (Ostrom threshold) so that if X ≥ X0, the N+EDG has dominant strategy in C. At the cooperative equilibrium, the community is at its peak strength: economic output from EDG is largest and the contribution to pre-emptive public good is highest. A severe-enough cost of the pandemic threat as perceived by the group (i) causes players to exhibit an altruistic phenotype (choosing C every time) and (ii) leads to the lowest probability of a bad outcome. We argue that previous experience with pandemics in the last two decades on top of a higher tendency to follow authority in East Asia supported both the provision of better pre-emptive public goods and the higher abidance with anti-COVID protocols. These explain better performance.","PeriodicalId":91420,"journal":{"name":"The Philippine review of economics","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43515861","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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