Record Details

Alternative Monetary Policy Rules for the Philippines

Philippine Review of Economics

View Archive Info
 
 
Field Value
 
Title Alternative Monetary Policy Rules for the Philippines
 
Creator Dakila, Jr., Francisco; Department of Economic Research, Bangko Sentral ng Pilipinas
 
Subject Monetary Policy; Inflation Targeting
 
Description A theoretical basis for modifying the currently popular nominal feedback rules is provided for the conduct of monetary policy so that they react to the forecasted inflation rate, instead of to current or past actual inflation. It is shown that such a modification reduces the risk of economic instability arising from the adoption of a nominal feedback rule, and thus produces results that are closer to the optimal solution. It is furthermore shown that given rational expectations, a forward-looking rule, and a money demand function that is not completely interest-inelastic, the optimal monetary policy entails some degree of policy activism. Friedman s constant money growth rule is therefore shown to be optimal only in a special case, i.e, when the money demand function is completely insensitive to the rate of interest. Empirical simulations are conducted, which support the view that forward-looking nominal instrument rules provide better performance in terms of keeping inflation closer to the targeted level. The simulations also provide a measure of the optimal degree of activism for monetary policy, as well as of the optimal forecasting horizon. JEL classification: E6
 
Publisher Philippine Review of Economics
 
Contributor —
 
Date 2010-09-17
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.econ.upd.edu.ph/pre/index.php/pre/article/view/46
 
Source Philippine Review of Economics; Vol 38, No 2 (2001)
1655-1516
 
Language eng
 
Relation http://www.econ.upd.edu.ph/pre/index.php/pre/article/view/46/549
 
Rights Copyright (c) 2017 Philippine Review of Economics