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The impact of Philippine monetary policy on domestic prices and output: evaluating the country’s transmission channels

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  • Sanjeev Parmanand

    (Durham University)

Abstract

This paper examines the price and output effects of Philippine monetary policy through its transmission channels from 1996 to 2019 using Structural Vector Autoregression (SVAR) models. Recursive and non-recursive identi!cation strategies are implemented to build a model that represents the small open economy of the Philippines, which is affected by exogenous shocks in oil prices and US interest rates. Impulse response functions are then compared between recursive and non-recursive models to select results that demonstrate consistency with macroeconomic theory and overall statistical signi!cance. The Local Projections method is then applied as a means of verifying the accuracy of the preferred model’s results. Findings show that a contractionary shock to Philippine monetary policy has weak short-term effects on domestic output and prices. These results contribute to the literature by characterizing the strength of transmission channels 17 years after in"ation targeting was adopted as a primary component of Philippine monetary policy.

Suggested Citation

  • Sanjeev Parmanand, 2022. "The impact of Philippine monetary policy on domestic prices and output: evaluating the country’s transmission channels," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 59(1), pages 46-76, June.
    • Handle: RePEc:phs:prejrn:v:59:y:2022:i:1:p:46-76
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    File URL: https://econ.upd.edu.ph/pre/index.php/pre/article/view/1023/932
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    More about this item

    Keywords

    Philippine monetary policy; structural vector autoregression; Local Projections method;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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