How to firewall the Philippine economy (update)

This is a somewhat perplexing question (see my earlier article in the Philippine Daily Tribune  of December 6, 2008).

The short answer is that we cannot firewall an open economy. We can do some things to make it resilient, as discussed in the Tribune piece, but these are long-term fixes. But short-run policy mistakes, such as an overly tight monetary policy and an overvalued exchange rate, will weaken the economy.  Short run Keynesian policies may or may not work, depending on how they are designed.  I believe that tax cuts are preferable to public works expenditures (also in the Daily Tribune, February 12, 2009).

We might try to turn inward, taking the protectionist path of Myanmar, North Korea, and Cuba. But this is not a serious option. It would simply keep us forever poor.

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