The Cointegration Behavior and Diagnostic Stability of Philippine Monetary Policy Implementation During the Period From 1990 to 2022

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Eric J. de Sera Nasution


The observations made in this study were used to evaluate the diagnostic stability of the Philippine Central Bank’s selected monetary policy targets, namely, the Gross Domestic Product and inflation, with money supply, credits, interest rates, and exchange rates, as independent variables, using the autoregressive distributed lag and error correction model analysis. The co-integrating behavior depicted that all p-values of less than the 5% significance level generated different behaviors. However, analysis of the Central Bank’s performance showed that there were no unit roots at all (p > .05) that signified a strong indication of cointegration behavior. The diagnostic stability of the Philippine monetary policy implementation was established over the period from 1990 to 2022. Further, money in circulation caused increases in domestic prices, interest rates, and inflationary pressure, and ultimately affected GDP (ppp). Understanding cointegration behavior is an imperative implication for policy makers to observe and take into consideration.

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