Monetary Conditions in the Philippines: An Assessment from DOLS and ARDL

This article examines key transmission mechanism channels for the Philippines over 1983:1-2010:4 using ARDL and DOLS. Results show evidence of cointegration between the real Gross Domestic Product, short- and long interest rates, exchange rate, claims on private sectors, and share prices. Relatively small coefficient of share price implies the existence of insider trading and the lack of local liquidity and limited private participation. The sign of interest rates implies the domination of the money market by the government securities. The economy may be exposed to the risk of recession when BSP increases the short rate continuously as the long rate will react conversely.