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A monetary policy rule: The augmented Monetary Conditions Index for Philippines using UECM and bounds tests

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  • Wai-Ching Poon

Abstract

This paper constructs the augmented monetary conditions index (AMCI) over 1982:1-2004:4 using UECM and bounds test approach for the Philippines data. Results reveal evidence of cointegration between the real GDP and its determinants, namely short-term interest rate, exchange rate and claims on private sectors that take into account three key transmission mechanisms channels in the conduct of monetary policy, namely the interest rate, exchange rate and credit channels. While asset price channel is found to be insignificant. The monetary conditions during the study periods is reflected in the Bangko Sentral ng Pilipinas’s reaction to the prevailing economic situation, imply that the AMCI tracks the inverse movements of the real GDP growth reasonably well after 1990s. Possible light of policy implications have put forward.

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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 04-10.

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Length: 17 pages
Date of creation: May 2010
Date of revision:
Handle: RePEc:mos:moswps:2010-04

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Keywords: AMCI; monetary policy; cointegration; bounds test; UECM; transmission mechanisms;

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  12. Peeters, Marga, 1999. "Measuring monetary conditions in Europe: Use and limitations of the monetary conditions index," MPRA Paper 23534, University Library of Munich, Germany.
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