1、The BSPs Structural Long-Term Inflation Forecasting Model for the Philippines,Objectives of the BSPs Macroeconometric Modelling Efforts,To construct a structural long-term annual macromodel of the Philippine economy that will serve as a quantitative tool of the BSP to forecast headline and core infl
2、ation rates one to two years in the future; To analyze the impact on headline and core inflation of key factors such as the exchange rate, world oil price, interest rates, wages, government borrowing and other relevant variables;,Objectivescontd,to determine the effectiveness of different channels a
3、nd instruments of monetary policy, with special attention to the impact of changes in the BSPs policy levers, namely, the short-term borrowing and lending rates to guide monetary authorities in their decision making process pertaining to the appropriate policies for the attainment of the BSPs primar
4、y mandate of promoting price stability conducive to balanced and sustainable economic growth,Main Characteristics of the BSP MacroModel,Partitions the Philippine economy into seven major blocs:,Price Bloc,ProductionBloc,Labor Bloc,Expenditure Bloc,BOP Bloc,Monetary Bloc,Fiscal Bloc,Complete Version
5、of the BSP MacroModel,Count of EquationsBLOC Behavioral Identities TotalExpenditure 9 10 19Monetary 9 11 20Fiscal 4 6 11Price 12 6 18Labor 1 3 4Production 1 1 2 BOP 2 3 5TOTAL 38 40 78,Flowchart of the BSPs Structural Long-Term Inflation Forecasting Model,UNEMP RATE,LFPR,LF,Employment,GDPPROD,WAGES,
6、PGDP,CPIFUEL,CPIRICE,CPICORE,GNP,GDP,CPI,GDPEXP,Consumption,X-M,Investments,ER,POIL$,IMPLICIT PRICE DEFLATORS,World Prices Exports/Imports,World Trade Gap,BOP,CREDIT PRIV/PUB,TBILL91 RATE,M3,OMO,Reserve reqts,Onite RRP rate,POPULATION,Budget Govt,Rev/Exp Govt,PRODUCTIVITY,NFIA,STOCKCAP,LIBOR90,P/$ E
7、R,STAT DISC,Main Characteristicscontd,Provides more detail in the determination of prices in the economyCPI = .1840 CPIFOOD + .0574 CPIFUEL+ .7586 CPICORE,Main Characteristicscontd,Explicitly incorporates the BSPs policy levers, namely: the overnight interest rate on RRPs statutory reserve ratio req
8、uirements liquidity reserve ratio requirements,BSP Policy Levers,Money MultiplierBase Money,Core and Headline InflationWagesEmploymentOutput,Transmission Mechanism,Flowchart of the Monetary Bloc,TBILL91,PGDP,RDEPOSIT,BM,M3,MM,NDABSP,NFABSP,RM,RR,REGS RESPOS,GDP,Budget CPS,BOP,Public Investment,Priva
9、te Investment,Public Credit,Private Credit,Other NDA,O-NITE,OMO,RRPS,Others,BSP Tbills,SDA,CPE,LDR,RLR,LIQRES,Rest of Priv Credits,Modelling the Transmission Mechanism of Monetary Policy,RRPS/TD = (RONIGHTRRP RLENDING)*, DLOG(STOCKPRICE)*, LIBOR90*, D96*, D97*, Y2K* 2. OMO = BBILLS + SDA + BSPTBILLS
10、 + RRPS + OMOTHER 3. NDABSP = OMO + NGDEPOSIT + NDABSPOTHER 4. RM = NFABSP + NDABSP,5. BM = RM + LIQRES + REGS + RESPOSITION 6. MM = (1 + CDR) / (CDR + RDR + (CASHINVDMB / TD) + LDR + (REGS + RESPOSITION) / TD) 7. M3 = MM*BM 8. TBILL91 = LOG(M3(-1)/PCPI(-1)/100)*, LOG(GDP), (DLOG(PCPI)*100)*, RONIGH
11、TRRP*, LIBOR90*, BALNG_NEW*,Modelling the Transmission Mechanism of Monetary Policy, contd,Modelling the Transmission Mechanism of Monetary Policy, contd,9. LOG(IP) = DLOG(GDP(-1)*, (TBILL91 (-1) PCPIINF(-1)*, BOPCAPBALN$(-1)*, (CREDITPRIV/PGDP)*, (ER/PGDP)* COMPNAGRIPCT = UNEMPRATE*, PGDPINF(-1)*CO
12、MPNAGRI = COMPNAGRI(-1)*(1 + (COMPNAGRIPCT/100) 11. DLOG(PIFC) = DLOG(PMCAP)*, BALNG_NEW(-1)/GDPN(-1)*, DLOG(PGDP(-1)*, (TBILL91-PGDPINF)*, DLOG(PCPIFUEL)*, D99* 12. DLOG(PGDP) = DLOG(COMPNAGRI*NEMPFTE/GDP)*, DLOG(PIFC*KAPITAL/GDP)*, LOG(ER*POIL$*MFUEL/GDP)*, D84*, D92*,In-Sample Forecasting Perform
13、ance of the Model,Mean absolute error: MAE = (1/n) P - A Mean absolute percent error: MAPE = (1/n) (P A)/A*100where:A = actual valueP = predicted or simulated by the modeln = number of periods covered by the simulation.,Statistics used:,Error Statistics Static Simulation, 1988-2001,MAPE MAEBase Mone
14、y 3.8 Wage (COMPNAGRI) 2.5 Private Consumption 1.0 GDP 1.2 Total Investment 5.0 Imports 1.8 M3 4.4 Exports 2.8 GDP Implicit Price Index 1.6 91-day T-bill 0.8 Inflation Rate 1.2 Unemployment Rate 0.7,Simulation Exercises,Impact of a sustained one-percentage point shock the RRP Rate Impact of a sustai
15、ned one-percentage point reduction in the volume of trade,-,Impact of a Sustained One-Percentage Point Shock in the RRP Rate: Change Relative to Baseline,-,Impact of a Sustained One-Percentage Point Reduction in the Volume of Trade: Change Relative to Baseline,Website: www.bsp.gov.ph E-mail: bspmailbsp.gov.ph,Thank you!,
