The Philippine Central Bank's Monetary Policy Reaction Function from 1992 to 2003

This paper attempts to provide an empirical determination of the Philippine central bank's (BSP) recent monetary policy stance, before and after its adoption of the inflation targeting framework, as revealed by its interest rate setting behavior. Employing Clarida, Gali, and Gertler's (1998, 2000) forward-looking model, it finds that the BSP has indeed been stabilizing inflation by and large through its key policy rate, though it appears to be accommodative with respect to the output gap. In addition, currency stability and expansionary money supply (M1) growth are other concerns of the BSP, though significantly so only in earlier periods.