Modelling Inflation in the Philippines: The P-Star Model Approach

Abstract

The P-Star approach of modeling inflation has been widely tested for the United States and other developed countries. However, the robustness of the P-Star model for developing countries has received less attention among the researchers. The purpose of this study is to test the applicability of the P-Star approach, which respect to a developing country ¨C the Philippines. Using a sample period of 1981:1 to 1994:4, our results suggest that the monetary data for the Philippine support the P-Star model approach. Our results indicate that broad money M2 provides an anchor for the Philippines inflation during the period under study.