A small macroeconometric model of the Philippine economy

MIMAP Research Paper, 1996

Structural adjustments such as trade liberalization, financial liberalization, and the like, are used to address both efficiency and production-related problems in the economy. Stabilization policies such as tight money and fiscal restraint, on the other hand, are used to reduce aggregate demand so as to reduce inflationary pressures and therefore stabilize the economy.

2011

We use Bayesian methods to estimate a medium-scale closed economy dynamic stochastic general equilibrium (DSGE) model for the Philippine economy. Bayesian model selection techniques indicate that among the frictions introduced in the model, the investment adjustment costs, habit formation, and the price and wage rigidity features are important in capturing the dynamics of the data, while the variable capital utilization, fixed costs, and the price and wage indexation features are not important. We find that the Philippine macroeconomy is characterized by more instability than the U.S. economy. An analysis of the several subperiods in Philippine economic history also reveals some quantitative evidence that risk aversion increases during crisis periods. Also, we find that the inflation targeting (IT) era is associated with a more stable economy: the standard deviations of the technology shock, the risk-premium shock, and the investment-specific technology shock have significantly lower variability than the pre-IT era, with the last two shocks being reduced by a factor of 5.6 and 2.3, respectively. The IT era is also associated with lower risk aversion. We also find that the adoption of inflation targeting is associated with interest rate smoothing in the monetary reaction function. With a more inertial reaction function, the Banko Sentral ng Pilipinas (BSP) had achieved greater credibility and consequently, it was able to manage the expectations of forward-looking economic actors, and thereby achieved greater responses of the goal variables to the policy rates, even if the size of interest rates changes are smaller. However, we also find that BSP's conduct of monetary policy appears to be more procyclical than countercyclical, particularly during the Asian financial crisis, and the recent global financial and economic crisis.

2010

Page 1. 11th National Convention on Statistics (NCS) EDSA Shangri-La Hotel October 4-5, 2010 MACROECONOMIC MODEL FOR POLICY ANALYSIS AND INSIGHT (A DYNAMIC STOCHASTIC GENERAL EQUILIBRIUM MODEL FOR THE BANGKO SENTRAL NG PILIPINAS) ...

2003

2006

This paper describes a quarterly macroeconometric model of the economy of People's Republic of China. The model comprises household consumption, investment, government, trade, production, prices, money, and employment blocks. The equilibrium-correction form is used for all the behavioral equations and the general→simple dynamic specification approach is adopted in order to ensure the best possible blend of a priori long-run theories with a posteriori identified short-run factors, as well as country-specific features. The tracking performance of the model is evaluated. Forecasting and empirical investigation of a number of topical macroeconomic issues utilizing model simulations have shown the model to be immensely useful. 3 The purpose of the modeling project is spelled out in the 2004 ADO Regional Technical Assistance Report (RETA: OTH 37423; see ADB 2004): "To improve the content and quality of ADO and ADO Update by developing quantitative tools/ econometric models in support of ADB's short-and medium-term country economic analysis." The RETA also specifies the required basic functions of the models: "to generate the short-and medium-term economic forecasts" and "to improve the analytical content of ADO and ADO Update through quantitative analysis of economic policy."

A simpler macroeconomic model of a developing economy is developed under the IS-LM and Mundell-Fleming model framework. The model is estimated and evaluated using the quarterly time-series data of Papua New Guinea, a small open developing economy. The macroeconometric version of the model, an over-identified simultaneous equation model with error correction specifications, is estimated by the 2SLS-CORC method. The specification of the model is appropriate and its predictive accuracy and structural stability are of acceptable standards. The model estimates are found useful to study the behaviour of the macroeconomic variables and to make forecasting in a developing economy. This model provides the basic structure to study macroeconomic behaviour and to make forecasts in developing economies. The model is capable of efficiently tracking the historical value of endogenous variables. The model must be appropriate for a small open developing economy with necessary modification for lag structure, structural break etc. It can be easily managed with minimum data input and resources. The model will be of interest to developing countries in the Asia-Pacific and other regions to conduct various policy analyses. The references of this article are secured to subscribers.

2000

This paper discusses the structure of the Philippine computable general equilibrium model (PCGEM). The model is a medium-sized CGE model of the Philippine economy. It disaggregates the production sector into 34 sectors. It incorporates 3 types of factor inputs: labor, variable capital and capital. The household sector is grouped in decile. Production differentiation is introduced in imports and exports. PCGEM is a neoclassical CGE model, with price clearing mechanisms. Furthermore, it is a full employment model. At its present state, the model is closed with fixed current account balance, fixed exchange rate (the numeriare), and endogenous PINDEX, which is the weighted value added price (or the GDP deflator). Also, savings go back into the system in the form of investments. The model is static and calibrated using the 1990 social accounting matrix and the 1990 sectoral tariff revenue. PCGEM is coded in a software called General Algebriac Modelling System (GAMS).

University of Mindanao International Multidisciplinary Research Journal, 2019

This study uses a Vector Error Correction Model as a tool for research to analyze and determine the characteristics of Gross Domestic Product (GDP) of the Philippines. Import of goods and services (import) and export of goods and services (export) are considered as influencing variables for the Gross Domestic Product of the Philippines. Quarterly data of GDP, import and exports from 1998 to 2016 were used in the study. All calculations were done using the free software JMulti. The three variables are found to be cointegrated with at most 1 rank. and the optimal number of lags is found to be 5. Furthermore, it was found out that both in the long run and short run, import has a positive impact on GDP while export has a negative impact on GDP. Based on the results of the diagnostic checks, the formulated vector error correction (VEC) model is an appropriate model for the data. Also, the generated forecasts using the VEC model are close to the actual values of the GDP. Thus, the formula...

Technology and Investment, 2011

This paper is part of efforts to develop macroeconometric model for Pakistan (MMP). This paper is an initial attempt to develop a small size macroeconometric model to foresee the effects of monetary policy through forecasting and simulations. We present the basic structure of macroeconometric model for Pakistan. This is a small-size model comprising 17 equations, out of which 11 are behavioral equations while the rest are either identities or definitional equations. OLS method is used to estimate the behavioral equations by using annual data from FY73-FY06. We provide the estimation results and results of policy simulations to quantify the impact of shocks to various exogenous variables.

1987

and Basil Kavalsi aire gratefully acknowledged. Carlos Bautista provided competent research assistance and Throadia Santos excellent secretarial assistance. The author is responsible for all errors and opinions in the paper. 16a * Using the exchange rates data for 2nd quarter of 1984 and assuming a 50% change in Philippine GDP deflator and a 5% change in the GDP deflator of US,

Due to prolonged recession in developed countries and the rise in interest rates, the Philippine government has embarked on a series of stabilization and structural programs to stem the alarming rate of the country’s indebtedness. This study presents the key macroeconomic policies adopted in recent years and these affect individual households. It also discusses the mechanisms by which monetary and fiscal adjustments affect the labor market, the goods market and the government expenditures including the provision of public goods. Areas for future research are highlighted.

2004

In this paper we build a small scale macroeconomic model for Venezuela. The model consists of four building blocks: a price equation, an aggregate demand equation (IS curve), an exchange rate equation (UIP) and a policy rule. The first two equations are estimated using quarterly data for the period 1989-2001. The exchange rate is determined as an asset price by the uncovered interest rate parity condition and the policy rule is calibrated for alternative preferences of the central bank authorities. All the equations in the model are forward looking, which is an innovation for the Venezuelan case that allows us to include the effect of agent's expectations. We conduct simulation experiments to analyze the effect of different shocks on inflation, output, exchange rate and interest rates. We examine the impact of a permanent reduction of the inflation target with different degrees of credibility for the central bank, and alternative specifications for the interest rate rule. Then we look at the effect of a temporary public expenditure shock, and a temporary increase in the policy rate. Síntesis En este trabajo se elabora un modelo macroeconómico de pequeña escala para Venezuela. El modelo se fundamenta en cuatro bloques resumidos en una ecuación de precios, una ecuación de demanda agregada (curva IS), una ecuación para el tipo de cambio y una regla de política para la tasa de interés. Las primeras dos ecuaciones son estimadas empleando datos trimestrales para el periodo 1989-2001. El tipo de cambio se determina por la condición de la paridad descubierta de las tasas de interés y la regla de política de la tasa de interés es calibrada para amoldarse a preferencias alternativas de la autoridad monetaria. Todas las ecuaciones incorporan las expectativas de los agentes. Con el modelo se realizan experimentos con shocks de distinta naturaleza para analizar su impacto la inflación y el producto. Se examina el impacto de una reducción permanente del objetivo de inflación con distintos grados de credibilidad de la autoridad monetaria y especificaciones alternativas para la regla de tasas de interés. También se analiza el efecto de un incremento temporal en el gasto público y de un incremento temporal en la tasa de interés de política.

Economic Modelling, 2007

This paper describes a quarterly macroeconometric model of the Chinese economy. The model comprises household consumption, investment, government, trade, production, prices, money, and employment blocks. The equilibrium-correction form is used for all the behavioral equations and the general→simple dynamic specification approach is adopted. Great efforts have been made to achieve the best possible blend of standard long-run theories, country-specific institutional features and short-run dynamics in data. The tracking performance of the model is evaluated. Forecasting and empirical investigation of a number of topical macroeconomic issues utilizing model simulations have shown the model to be immensely useful. JEL classifications: C51; E17 20 7882 5096 Fax: +44 (0)20 8983 3580 Web: www.econ.qmul.ac.uk/papers/wp.htm and Pilipinas Quising. All rights reserved Xinhua He, Rui Liu, Shiguo Liu, Nedelyn Magtibay-Ramos

monash.edu.au

explanation of how the model is solved using the GEMPACK system. Computer files are freely available, which contain a complete model specification and database.