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The Philippine Central Bank's Monetary Policy Reaction Function from 1992 to 2003

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  • John Michael Ian S. Salas

    (University of the Philippines School of Economics)

Abstract

This paper attempts to provide an empirical determination of the Philippine central bank's (BSP) recent monetary policy stance, before and after its adoption of the inflation targeting framework, as revealed by its interest rate setting behavior. Employing Clarida, Gali, and Gertler's (1998, 2000) forward-looking model, it finds that the BSP has indeed been stabilizing inflation by and large through its key policy rate, though it appears to be accommodative with respect to the output gap. In addition, currency stability and expansionary money supply (M1) growth are other concerns of the BSP, though significantly so only in earlier periods.

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File URL: http://128.118.178.162/eps/mac/papers/0405/0405021.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0405021.

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Length: 26 pages
Date of creation: 19 May 2004
Date of revision:
Handle: RePEc:wpa:wuwpma:0405021

Note: Type of Document - pdf; pages: 26. Research seminar (master's) paper
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Web page: http://128.118.178.162

Related research

Keywords: monetary policy; inflation; interest rates; inflation targeting; macroeconomics; central bank; taylor rule; stabilization; Philippines; BSP; forward-looking;

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References

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  1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  2. John B. Taylor, 1998. "An Historical Analysis of Monetary Policy Rules," NBER Working Papers 6768, National Bureau of Economic Research, Inc.
  3. Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," NBER Working Papers 6442, National Bureau of Economic Research, Inc.
  4. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
  5. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-58, May.
  6. Lars E.O. Svensson, 2002. "Inflation Targeting: Should It Be Modeled as an Instrument Rule or a Targeting Rule?," NBER Working Papers 8925, National Bureau of Economic Research, Inc.
  7. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  8. Maria Socorro Gochoco-Bautista, 2001. "What Drives Monetary Policy?," UP School of Economics Discussion Papers 200105, University of the Philippines School of Economics.
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