ABSTRACT
This chapter examines quantitatively the economy-wide income and equity effects, focusing on lower-income rural households, of alternative trade policy adjustments to cope with an unsustainable current account deficit. It describes the nature of external shocks to the Philippine economy, the severity of current account deficits and the changes in trade policies adopted since the early 1970s. The chapter discuses the structure of the computable general equilibrium model for the Philippines. It shows the comparative results of alternative trade policy adjustments to deal with the current account imbalance. Markets for goods, factors and foreign exchange are assumed to respond to changing demand and supply conditions, which in turn are affected by government policies and the external environment. The model makes use of the numerical social accounting matrix for 1979 as database, representing the initial conditions that are perturbed by the postulated exogenous shocks.
