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A Monetary Policy Rule: The AMCI for the Philippines Using UECM and Bounds Test

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  • Wai-Ching Poon

Abstract

This paper constructs the Augmented Monetary Conditions Index (AMCI) from 1982:1 to 2004:4 using Unrestricted Error Correction Model (UECM) and bounds test approach for the Philippines data. The results reveal evidence of cointegration between the real Gross Domestic Product (GDP) and its determinants, namely, short-term interest rate, exchange rate, and claims on private sector that take into account three key transmission mechanism channels in the conduct of monetary policy: interest rate, exchange rate, and credit channels. The monetary condition during the study period is reflected in the Bangko Sentral ng Pilipinas’s reaction to the prevailing economic situation, and that the AMCI tracks the inverse movements of the real GDP growth reasonably well, especially after 1990s. The paper also sheds possible light on policy implications.

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  • Wai-Ching Poon, 2011. "A Monetary Policy Rule: The AMCI for the Philippines Using UECM and Bounds Test," The IUP Journal of Bank Management, IUP Publications, vol. 0(4), pages 16-30, November.
    • Handle: RePEc:icf:icfjbm:v:10:y:2011:i:4:p:16-30
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