InflationandEconomicGrowthinthePhilippines.pdf

Philippine Institute for Development Studies Inflation and Economic Growth in the Philippines Josef T. Yap DISCUSSION PAPER SERIES NO. 96-11 The PIDS Discussion Paper Series constitutes studies that are preliminary and subject to further revisions. They are be- ing circulated in a limited number of cop- ies only for purposes of soliciting com- ments and suggestions for further refine- ments. The studies under the Series are unedited and unreviewed. The views and opinions expressed are those of the author(s) and do not neces- sarily reflect those of the Institute. Not for quotation without permission from the author(s) and the Institute. September 1996 For comments, suggestions or further inquiries please contact: The Research Information Staff, Philippine Institute for Development Studies 3rd Floor, NEDA sa Makati Building, 106 Amorsolo Street, Legaspi Village, Makati City, Philippines Tel Nos: 8924059 and 8935705; Fax No: 8939589; E-mail: publications@.ph Or visit our website at .ph INFLATION AND ECONOMIC GROWTH IN THE PHILIPPINES Jo_ef T. Yap2 I. Introduction Inflation is dead has been a popular adage for the past five years but it seems deep- seated problems have a way to resurrect themselves. This cavalier declaration by people like Lester Thurow and Roger Bootie is inaccurate madmay be based on flawed theories or superficial empirical evidence. In the Philippine context at least, inflation is still regarded as a clear and present danger to macroeconomic stability. After being maintained at single digit levels for the past four years, 1992-95, inflation reached double digit levels in the past nine months, averaging 11 percent over this period (see Table 1). The Philippines remai