 Policy responses to shocks and monetary effectiveness under inflation targeting: The Philippine casePhilippine Review of Economics, 2020, vol. 57, issue 2, 116-145 Abstract: This article examines how monetary policy responses to economic shocks and monetary policy effectiveness have changed in the Philippines since inflation targeting was implemented in 2002. The study makes use of a structural vector autoregression to estimate financial and monetary policy shocks, among other shocks, based on an identification strategy similar to Gilchrist and Zakrajsek [2012] and Bassetto et al. [2016]. A Philippine financial conditions index (FCI) purged of monetary influences then decomposed according to instrument or market is used to aid estimation and analysis. Results of the recursive vector autoregressions (VAR) comparing pre-inflation-targeting and inflation-targeting periods reveal stronger and more systematic policy responses to non-financial demand shocks, partial and transitory accommodation of supply shocks, and greater exchange rate flexibility initially under the new monetary policy regime. There is, however, an observed weakening of monetary policy responses to financial disturbances and monetary policy transmission to growth likely related to episodes of strong capital inflows. Keywords: central banks; inflation targeting; monetary policy; Philippines; structural VAR (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:phs:prejrn:v:57:y:2020:i:2:p:116-145 Access Statistics for this article More articles in Philippine Review of Economics from University of the Philippines School of Economics and Philippine Economic Society Contact information at EDIRC. |
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