A monetary policy rule: The augmented Monetary Conditions Index for Philippines using UECM and bounds tests

Wai-Ching Poon

No 04-10, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: This paper constructs the augmented monetary conditions index (AMCI) over 1982:1-2004:4 using UECM and bounds test approach for the Philippines data. Results reveal evidence of cointegration between the real GDP and its determinants, namely short-term interest rate, exchange rate and claims on private sectors that take into account three key transmission mechanisms channels in the conduct of monetary policy, namely the interest rate, exchange rate and credit channels. While asset price channel is found to be insignificant. The monetary conditions during the study periods is reflected in the Bangko Sentral ng Pilipinas’s reaction to the prevailing economic situation, imply that the AMCI tracks the inverse movements of the real GDP growth reasonably well after 1990s. Possible light of policy implications have put forward.

Keywords: AMCI; monetary policy; cointegration; bounds test; UECM; transmission mechanisms (search for similar items in EconPapers)
Pages: 17 pages
Date: 2010-05
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (4)

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