An Application of Bacha s Three-Gap Model: The Case of the Philippines

Abstract

This paper uses a three-gap analysis to discuss obstacles to economic growth of a highly country like the Philippines and how these affect inflation. The analysis show the rather evident fact that as the foreign exchange constraint continues unabated, the only hope for the economic growth would be structural improvements that would increase substantially the country's export earnings, reduce the country's dependence on imported inputs and imported capital goods, and reduce the grave fiscal drain on dept service.

Overall, this implies that an increase in productivity and competitiveness of the economy should be achieved without the massive foreign inflows that occurred in the last decades.