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

Salas, John Michael Ian S

doi:10.2139/ssrn.981648

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

Philippine Review of Economics, Vol. XLIII, No. 2, December 2006

26 Pages Posted: 21 Apr 2007 Last revised: 23 Dec 2007

See all articles by John Michael Ian S Salas

John Michael Ian S Salas

Harvard University - Center for Population and Development Studies

Date Written: May 1, 2004

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.

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

JEL Classification: E52, E58

Suggested Citation: Suggested Citation

Salas, John Michael Ian S, The Philippine Central Bank's Monetary Policy Reaction Function from 1992 to 2003 (May 1, 2004). Philippine Review of Economics, Vol. XLIII, No. 2, December 2006, Available at SSRN: https://ssrn.com/abstract=981648 or http://dx.doi.org/10.2139/ssrn.981648