The Cointegration Behavior and Diagnostic Stability of Philippine Monetary Policy Implementation During the Period From 1990 to 2022
Main Article Content
Abstract
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.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Copyright: Asia-Pacific International University reserve exclusive rights to publish, reproduce and distribute the manuscript and all contents therein.
References
Bangko Sentral ng Pilipinas. (2023). Monetary policy report August 2023. BSP open access publication. https://www.bsp.gov.ph/Price%20Stability/MonetaryPolicyReport/FullReport_2023_3.pdf
Bhatta, G. R. & Shrestha, M. B. (2018). Selecting appropriate methodological framework for time series analysis. The Journal of Finance and Data Science, 4(2), 71–89. https://www.sciencedirect.com/science/article/pii/S2405918817300405
Brunner, K., & Meltzer, A. H. (1972). Friedman’s monetary theory. JSTOR Journal of Political Economy, 80(5), 837–851. https://www.jstor.org/stable/1830414
Chen, W., & Phelan, G. (2023). Should monetary policy target financial stability? Review of Economic Dynamics Journal, 49, 181–200. https://www.sciencedirect.com/science/article/abs/pii/S1094202522000436
Delivorias, A. (2021). Central bank digital currencies: Evolution or revolution? Think Tank European Parliament open access publication. https://www.europarl.europa.eu/thinktank/en/document/EPRS_BRI(2021)698804
Friedman, M. (1968). The role of monetary policy. The American Economic Review, 58(1), 1–17. https://www.aeaweb.org/aer/top20/58.1.1-17.pdf
Iancu, A., Anderson, G., Ando, S., Boswell, E., Gamba, A., Hakobyan, S., Lusinyan, L., Meads, N., & Wu, Y. (2020, November). Reserve currencies in an evolving international monetary system (Working Paper No. 2020/002). https://www.elibrary.imf.org/view/journals/087/2020/002/article-A001-en.xml
Johansen, S. (2020). Cointegration: Overview and development. In T. Mikosch, J. P. Kreib, R. A. Davis, T. G. Andersen (Eds.), Handbook of financial time series (pp. 671–693). https://www.fsb.miamioh.edu/lij14/ 672_johansen.pdf
Kurup, N. (2018, May 30). Digital disruption: How fintech pushing banks to change. Finextra open-source article. https://www.finextra.com/blogposting/15407/digital-disruption-how-fintech
Lim, E. G., & Sriram, S. S. (2003, March). Factors underlying the definition of broad money (IMF Working Paper No. 2003/062). https://www.elibrary.imf.org/view/journals/001/2003/062/article-A001-en.xml
Mathai, K. (2023). Monetary policy: Stabilizing prices and output. International Monetary Fund (F&D Finance Development). https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Monetary-Policy
Mehar, M. A. (2023). Role of monetary policy in economic growth and development: From theory to empirical evidence. Asian Journal of Economics and Banking, 7(1), 99–120. https://www.emerald.com/insight/ content/doi/10.1108/AJEB-12-2021-0148/full/html
Nasreen, S., & Anwar, S. (2023). Financial stability and monetary policy reaction function for South Asian Countries: An econometric approach. The Singapore Economic Review, 68(03), 1001–1030. https://ideas.repec.org/a/wsi/serxxx/v68y2023i03ns0217590819500395.html
Popescu, A. (2022, May). Cross-border central bank digital currencies, bank runs and capital flows volatility (IMF Working Paper No. 2022/083). https://www.imf.org/en/Publications/WP/Issues/2022/05/06/Cross-Border-Central-Bank-Digital-Currencies-Bank-Runs-and-Capital-Flows-Volatility-517625
Pradhan, R. P., Nishigaki, Y., & Hall, J. H. (2017). The multivariate dynamic causal relations between financial depth, inflation, and economic growth in the Philippines. The Philippine Review of Economics, 54(1), 63–93.
Smets, F. (2014). Financial stability and monetary policy: How closely interlinked? International Journal of Central Banking, 35, 263–300. https://www.ijcb.org/journal/ijcb14q2a11.pdf
Suman, K. (2023). Fisher’s quantity theory of money: Equation, example, assumptions and criticisms [Lecture notes]. Business Administration, Maseno University, Kenya. https://www.economicsdiscussion.net/ money/quantity-theory-of-money/fishers-quantity-theory-of-money-equation-example-assumptions-and-criticisms/31214
Tan, C. T., Mohamed, A., Habibullah, M. S., & Chin, L. (2020). The impacts of monetary and fiscal policies on economic growth in Malaysia, Singapore, and Thailand. South-Asia Journal of Macroeconomics and Public Finance, 9(1), 114–130. https://journals.sagepub.com/doi/10.1177/2277978720906066
Wang, Y., Lucey, B. M., Vigne, S. A., & Yarovaya, L. (2022). The effects of central bank digital currency on financial markets. Technological Forecasting and Social Change Journal, 180(2022), 121715. https://www.sciencedirect.com/science/article/pii/S0040162522002414
World Bank (2022). World Bank open data. https://data.worldbank.org/
Zhang, T. (2020). New forms of digital money: Implications for monetary and financial stability. International Monetary Fund. https://www.imf.org/en/News/Articles/2020/10/30/sp103020-new-forms-of-digital-money
Zoeller, C. J. P., &Bandelj, N. (2019). Crisis as opportunity: Nixon’s announcement to close the gold window. Socius, 5, 1–14. https://journals.sagepub.com/doi/10.1177/237802311984181