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

Author

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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.

Suggested Citation

  • John Michael Ian S. Salas, 2004. "The Philippine Central Bank's Monetary Policy Reaction Function from 1992 to 2003," Macroeconomics 0405021, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0405021
    Note: Type of Document - pdf; pages: 26. Research seminar (master's) paper
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0405/0405021.pdf
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    References listed on IDEAS

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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 1029-1054, July.
    2. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(1), pages 147-180.
    3. John B. Taylor, 1999. "A Historical Analysis of Monetary Policy Rules," NBER Chapters, in: Monetary Policy Rules, pages 319-348, National Bureau of Economic Research, Inc.
    4. Maria Socorro Gochoco-Bautista, 2001. "What Drives Monetary Policy?," UP School of Economics Discussion Papers 200105, University of the Philippines School of Economics.
    5. Svensson, Lars E. O., 2002. "Inflation targeting: Should it be modeled as an instrument rule or a targeting rule?," European Economic Review, Elsevier, vol. 46(4-5), pages 771-780, May.
    6. 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.
    7. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-858, May.
    8. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, January.
    9. 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.
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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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